Public Bill Committee

[Mr George Howarth in the Chair]

The Committee deliberated in private.

On resuming—

George Howarth: I welcome the witnesses who have kindly agreed to give evidence today. It would be helpful if you could introduce yourselves individually before we commence the proceedings.

Sian Williams:  I am Sian Williams from Toynbee Hall.

Tony Dolphin:  I am Tony Dolphin. I am the senior economist at the Institute for Public Policy Research.

Dr Samantha Callan:  I am Samantha Callan. I am the chairman in residence at the Centre for Social Justice.

George Howarth: Thank you very much. David Hanson, do you wish to start?

Q 251251

David Hanson: Welcome to another of our witness sessions. We are nearing the end now, but I hope that you can contribute to our discussion in a fruitful way. I would like to start by asking about the objectives of the child trust fund and whether you think that they have been met. The first objective was to encourage a general saving culture, particularly for those on lower incomes. The second objective was to put in place an asset for all children at the age of 18. May we start with Sian from Toynbee Hall? Is the child trust fund meeting those objectives?

Sian Williams:  On putting in place assets for young people, absolutely. It is a given programme—you cannot opt out of it. So, even though there has been some research to show that take-up rates by parents, in terms of active involvement, are not as high as we might have hoped for—although the figures are quite high compared to other savings programmes—because it is a given programme, you are automatically enrolled. So, from the very beginning we know that every child benefits in some way. In terms of contributions from parents and family members, obviously there is a broad range. Early activity in the programme showed that 18% of low-income families were contributing in some way to the child trust fund. While that fluctuated over the programme itself, we do know that having match funding and a process where people could see something—a physical asset—rather than just having some tax relief or something that they could not quite get their heads around, was a really important step in changing people’s understanding of saving. It moved people away from thinking that savings were out of their domain and that contributing to savings was an impossible dream. It actually helped people move on to a place where they could see that something tangible was being formed and they could put that aside for their children. In terms of behavioural economics, it was a very important programme. While I would say that not every family contributed and not every child’s trust fund was being built up on an equal basis, every child was benefiting.
My real concern around the removal of the child trust fund is not across the whole population; it is for the lowest income groups. We really believe that, for that particular income group, from 16 to 18 years was a really important time to have no assets to fall back on. That really puts people in a difficult position. It reduces their opportunities, and we think the child trust fund was really effective in tackling that.

Q 252

David Hanson: Mr Dolphin or Dr Callan, do you dissent from that view in any way, shape or form?

Tony Dolphin:  Certainly not. I would agree, but I have a couple of points. First, we have to remember that the child trust fund is still in its infancy. The oldest accounts have been open for only eight years and one eighth of all accounts have been open for less than a year. Looking at the aggregate numbers of people who have saved into them could be misleading at this stage, because many of these accounts have not been open for very long. If the programme had been allowed to build up to its full course, we probably would have found a greater proportion of parents saving into those accounts.
Secondly, although we can never know for sure, there is certainly evidence from some of the providers that some of the savings that are going into these accounts—around one in four does get extra savings—are new and additional savings that have been generated by the existence of child trust funds. If we compare child trust funds with something like the individual savings accounts, certainly the evidence is that most ISA savings are, in fact, just savings that would have been made anyway and are put into ISAs for the tax relief. With the child trust fund, it seems that we are, in some cases, generating additional savings.

Q 253

David Hanson: Dr Callan?

Dr Samantha Callan:  I would have to differ to a certain extent. I agree with Tony that these things have had quite a short lifespan, so we cannot say that things would not have improved, but child trust funds disproportionately favour the middle classes or, in other words, people who are usually more financially literate—not always, obviously.
Parents opened 75% of vouchers issued and, of those, 99% have not received the maximum funding available. Therefore, it is not those on the lowest income that are actually taking the initiative to open the accounts. Yes, a quarter of accounts have received additional deposits, but that means that three quarters have failed to receive additional deposits. I think a lot of people say, “Thank you very much.” but I do not agree that it is necessarily changing behaviour where it matters most, which is where people have fewer assets to look forward to when the child is 18.
I am just not convinced by this idea that, by 18, children will have had two or three years of financial education. Where we are talking about the poorest 20%, which is the concern of the Centre for Social Justice, I am not convinced, because to engage in financial education you need to engage in school, and one thing that we were very concerned about, in all our work, is the rate of educational failure among the poorest. I would challenge the view that this is a very effective policy.

Q 254

David Hanson: Is it less effective than, for example, the proposed Government alternative, which is a tax-free ISA that will not necessarily encourage poorer people to contribute?

Dr Samantha Callan:  I would prefer to concentrate on the fact that, at the end of the day, it is a transfer of money, which is not necessarily the best way to tackle poverty. The approach of tackling poverty by transferring money seemed to be the characteristic of the previous Government. Frankly, we need to tackle the root causes of poverty and make sure that the people know how to use money that is redistributed—I do not to want say “wisely,” because that is terribly patronising. We are talking about young people at age 18 living on rough estates where there is addiction, educational failure and serious personal debt. I would be much more inclined to go with programmes that are really well targeted financial initiatives, often for kids who are completely disaffected by mainstream education.

Q 255

David Hanson: The two are not necessarily mutually exclusive, but we can range across that another day, Mr Howarth.
I am particularly interested in your assessments—just short, pithy comments on this, if possible, so that colleagues can come in—of the impact of ending the child trust fund, particularly on what I would call more vulnerable groups such as looked-after children, children and young people with disabilities, and those in the poorest one third of incomes. Every manifesto, with the exception of that of the Liberal Democrats, proposed at least to maintain the child trust fund in its current form for all those groups.

Sian Williams:  At this stage, given the economic climate, I would not advocate keeping the child trust fund for the entire population. However, for the really disadvantaged—I would include among them the groups that you described and families with extremely low incomes such as those with parents in long-term unemployment and very little hope of employment—I have a real concern that we are pushing towards policies that will increase inequalities.
We work a lot with young people aged 14 to 25 across London. We help them look at their financial future in terms of training, education and employment opportunities, and we know that, for many of them, not having any assets to fall back on reduces their options. Young people are concerned that if they would like to be able to study or go into some kind of training, they will not have any money to support themselves, or their family will need them to get a low-paid job—that is all they can get with their qualifications—or they will need to be bringing in some kind of jobseeker’s allowance. We see not having any assets to fall back on as a real problem.
It is not that I am particularly advocating that we keep the child trust fund, but I want to see some kind of policy that supports those particular groups. Options are the child trust fund, another form of asset base to fall back on, or financial support, particularly now that we are losing education allowances. It is very important to tackle that.

Tony Dolphin:  Perhaps I could just add that, for those groups, it is not really about lifting them out of poverty so much as giving them an asset with which they can do something when they reach 18. It may be some extra education or training, or something as simple as being able to afford driving lessons, which will give them a better chance in the job market. Even the double amount of the child trust fund—£500 at birth, £500 at age seven—is not enough to lift them out of poverty, but it may be enough to give them an extra chance. Not every child will be inclined to take that extra chance, but some may, and that is the beauty of the policy.

Dr Samantha Callan:  The fact that we could be looking at very small percentages of disadvantaged groups who will take up the opportunity seems to make it inappropriate in the current climate to make a universal benefit, but I am not even convinced that trying to target straightforward cash transfers at the very poorest population is the best way to help them.

Q 256

David Hanson: So would you advocate ending the child trust fund for looked-after children and children with disabilities as well?

Dr Samantha Callan:  When you start to say, “No way, we cannot just get rid of the whole thing completely. We will have this, that and the next category,” I would want to see evidence. I suppose we do not yet have evidence because the children have not reached the age of majority. There will always be exceptions: some children with disabilities have quite wealthy parents. Children with disabilities tend to be concentrated in the poorest 20%, but I am not convinced that we should necessarily ring-fence those groups.

Q 257

John Hemming: There are two key questions to do with the child trust fund. The first was raised by the Institute for Fiscal Studies. Is there any evidence that doing it this way has encouraged saving such that there is a real benefit to having the money locked in for 18 years? It is obviously a positive thing for grandparents to be able to lock the money away until the child is older. Is there any evidence that it has encouraged additional saving?

Tony Dolphin:  No; in the sense that no one has gone out and interrogated every parent who has put money into these accounts, and asked them whether they have made extra savings. I see that you have had evidence from the Children’s Mutual Society—I suspect that it has already told you this—and its evidence from its customer base is that some of the money that is going into the accounts is additional savings. You can never have a perfect counterfactual in this case, however.

Q 258

John Hemming: That is one aspect. The second aspect is that, in a sense, money is often tighter for the low-paid than it is for people on benefits. The IFS and Louise Silverton of the Royal College of Midwives have argued that given that maternal health is very dependent on having cash now, they would advise people who really had tight finances not to save money until their child is 18 but to spend it now on improving their health and lifestyle. What is your view on that?

Dr Samantha Callan:  When we talk about groups such as children in care and disabled children, families are really struggling now. Relationships between the parents are very much under pressure. Respite care is one of the things that could easily be severely cut despite the aiming high for disabled children policy, which was extremely well bought into by lots of stakeholders. We would recommend things such as mental health champions for children in care, but there is only a certain amount of money to go around and we need to make sure that what we are spending money on has the biggest leverage for these children’s life chances.

Q 259

John Hemming: I am talking about the families themselves saving the money, not about the state spending money. The question is, if families have spare money, should they spend it now or lock it away for 18 years?

Tony Dolphin:  Just as there is no evidence that the child trust fund has generated extra savings, because no one has asked the question, there is absolutely no evidence that encouraging people to save and making vehicles available to do so is causing any family in this country to sacrifice putting food on the table.

Q 260

John Hemming: I am asking whether you would advise a family in that situation to lock the money away for 18 years.

Tony Dolphin:  It is not for me to advise them, because I am not a financial adviser. It is for them to make their own decision. For most families, it is not as simple as asking, “Shall we have food or shall we have savings?” For a small proportion of families who are in very dire straits that will be true, but they are not sitting down and thinking, “Oh, there is a child trust fund so I will put some money into it.” We know that they are not. I just do not think that that is happening.

Sian Williams:  It is not an either/or situation. Trying to tackle poverty by creating an asset base is not necessarily the only solution, and it is not the whole solution. When we are looking at family health, that means giving a family access to adequate income; ensuring that people have a living wage; and ensuring that we are not asking people to borrow in order to survive on adequate nutrition, to provide clothing for their children, to get their children into school, to make sure that they have books and so on. We are talking about making sure that people have a living wage. Alongside that, there is the idea of creating opportunities for young people in the future by building up an asset base.
When we assess a family situation and say that they need to decide between feeding their children properly, creating a safe environment for them to live in that is damp-free, mould-free and free from fear of gas poisoning, and creating a savings base, we are looking at a serious problem. It is about much more than whether we need a child trust fund. I really agree with your comments, Dr Callan, that there we are looking at adequate income levels and poverty. I do not think that most families are making a choice between feeding their children and creating a savings base. The child trust fund is not taking money from feeding children; it is creating an opportunity for parents and other family members to lock some assets away.

Q 261

John Hemming: So you are saying that people who are on benefits—as I have said, they often have a bit more disposable income than those on a low wage—have perfectly enough money to feed themselves adequately, and therefore they have spare money to save.

Sian Williams:  I am not saying that benefits necessarily provide a living wage. For some families they will; for others they will not. Each family is in an individual situation—I apologise for my croaky voice—and it is about providing families not only with the skills and the knowledge but the tools to make those choices. We work with lots of low-income families who are incredibly careful and incredibly capable with their money, and some of them are able to save—not necessarily for the long term, but they make very good short-term saving options. However, we also need to make sure that people have access to other services, such as affordable credit, so that they can smooth consumption and continue to save on the side. For example, giving people access to credit union facilities would be excellent. I am not saying that we should lose the child trust fund, but if we do, I would like to see some real thought given to alternatives and making them available.

Tony Dolphin:  One other point is that we have to remember that the child trust fund is designed to run for 18 years. We should not assume that families will be able to save into the child trust fund every year, but we would hope that every family would, at some point during those 18 years, be in a position to save, because they were in work, had a windfall or had a reason to save some money. They are not forced to save, and they are certainly not forced to save every year. As their circumstances change, perhaps the fact that it is there will encourage them to put away some money in a good year.

Q 262

Kate Green: Dr Callan, I absolutely agree with you about the importance of financial education and the range of policies that we are deploying to support people in low-income households in particular. It was suggested to us in an earlier evidence session that one way of engaging young people with financial education was to do it when they had a lump of money that was theirs. That would enable them to think about their savings and spending habits in a way that had some reality for them. To what extent do all the witnesses think that giving a young person aged 18 a lump of money will support their engagement in financial education, particularly in their teen years?

Sian Williams:  We work with young people in further education, and we work a lot with young people who are opening their very first bank account and getting their educational allowance, and who have some real money to work with. If you put the child trust fund to one side and look at a young person who has their hands on some money that has come their way, you will see that they are so focused on asking: “How do I make that money go as far as possible? What can it do for me?”
Interestingly, our programme, which we run across London, started out just teaching financial education in the classic sense of saving, borrowing and so on. We are redesigning the programme, though, because so many people come back to us and say, “Brilliant, you taught me how to make this money go as far as possible, but now I want you to teach me how I can use this money to leverage, to create more income opportunities. I want to do better, and having this money gives me an opportunity to do that.” I absolutely agree with you that the moment when you really engage people is when they come to you and say, “I have this financial concern”, or this asset, debt or problem.
Personally, I also believe that we should have financial education in schools as part of the national curriculum. The Consumer Financial Education Body, which aims to educate every adult, is one way of doing it, but a much better, cheaper and more effective alternative is to educate every child about the issues. That would not rule out the need to work with young people, because I think you learn at different stages and in different ways. Our experience with young people with the educational allowance shows us that it would be extremely effective if you worked on money with young people as they take it out of the child trust fund, because then it is real and means something.

Dr Samantha Callan:  I am concerned that the lump sum they are getting is basically a handout. If we are trying to tackle dependency culture through welfare reform, I would prefer it if we helped parents to help their children by saying, “You’ve got a job,” rather than just giving them a handout. For so many children, their babysitting money or whatever is just discretionary income. If parents are giving pocket money, they could reduce it as their children earn a bit of money. Teaching those kinds of things creates a real sense of achievement for having earned their own income. It is being much more realistic about what the rest of life is going to look like.

Q 263

Kate Green: Aren’t you concerned, Dr Callan, to address the inequality in asset holding, which feeds through to inequality in opportunity for young people at age 18? With all its imperfections, delivering a lump sum to young people at age 18—and a larger lump sum, in terms of the Government’s contribution for the poorest young people—partly addresses that. If you leave it to the will and wish of parents and financial education alone, you will continue to see a significantly uneven playing field when young people reach age 18.

Dr Samantha Callan:  Yes, I am concerned, but so much policy has been about, “We can’t really trust the parents; we can’t trust that children will acquire skills, so we have to do it for them; we’ll just put something in place and assume that they will not do it themselves.” Or, as I said, it is assumed that the family will not train them in these skills. We need children to learn good financial skills. We often need to help parents from every part of the income spectrum, who can often struggle with good financial management. You cannot make people do it. As for debt counselling, we have the My Home Finance scheme set up by the Department for Work and Pensions with the National Housing Federation and the Royal Bank of Scotland. We have gone for the child again and again in social policy, and we have got to bring parents in, because we are talking about a lifetime of good financial planning.

Q 264

Kate Green: How would that work for looked-after children? Whom would you be educating to provide for the child in that case? If the state does not deliver a lump sum to the looked-after child, who will?

Dr Samantha Callan:  Again, it is tempting to think that what is necessary is hard cash, but I would much rather we were looking throughout the lifetime of the looked-after child at how we are going to help that child acquire the skills and knowledge that it would have got from loving, nurturing parents. Just giving them money will not necessarily provide training for the rest of their life.

Q 265

Harriett Baldwin: The background to the Bill is the country’s huge financial deficit, and not having the child trust fund saves the Government £500 million a year. Obviously, there are difficult choices to be made with these types of schemes. Everyone here would agree that this is a nice-to-have scheme. It is obviously appealing, and we have heard a lot of evidence about its appeal. I am going to read out a list of seven Government policies that help to try to ensure that children have a good start in life. I want to ask the witnesses whether they would put the child trust fund ahead of these other choices: protecting the NHS budget; increasing the number of health visitors; free prescriptions for pregnant women; the Healthy Start programme, which gives vouchers for milk and fruit to certain categories of people; the £500 Sure Start maternity grant for the first child; extending nursery education for disadvantaged two-year-olds to 15 hours; and the pupil premium. Would the witnesses want to make the case that the child trust fund is more valuable than any of those?

George Howarth: Before the witnesses answer that question, it is slightly outside the scope of the Bill to be making comparisons. I understand the point that you are making, but it is beyond our scope to debate the merits of a series of other policies. While I am happy to allow the witnesses to answer the question, we do not want to start a debate on the relative merits of a whole series of other policies. I am sure they will find an adroit way of answering the question that satisfies you and me.

Harriett Baldwin: I would just like to highlight the fact that those policies were mentioned by the Minister on Second Reading.

George Howarth: Sure, but that does not necessarily bring it within the scope of the Bill. There is a lot more licence on Second Reading than in Committee. I am not overruling the question; I am merely saying that we need to be a bit careful in how we develop the theme.

Sian Williams:  I think that these points are relevant to the health in pregnancy grant. They are irrelevant to the child trust fund or the saving gateway, because they are about completely different concepts. All the things that you listed are around creating a safe and healthy space for children, from pre-natal all the way through to being at school. The child trust fund is about creating an asset base for young people, as they really start an independent life, and I do not think that they are connected at all. I am not an expert who can comment on the health in pregnancy grant, so that is my response.

Dr Samantha Callan:  I would say that, thankfully, people are much more concerned now with early intervention. I completely agree on one level that we are talking about apples and pears, but that kind of addresses the point I was trying to make, which is about what happens if we do not get children off to a good start in life, and if parents have not got the skills to raise their children. We are all beginning to be very familiar with the research about the first 18 months and first three years, and the way disadvantage sets in so early, so we must think about having an asset at 18 when you have so many other disadvantages.
We could be in danger of just fixating on giving children a lump sum when they have got so many things that are going to stop them spending it in a very constructive way, so I welcome the pecking order question. On health visitors, practically every report that I have ever written has said that we need more of them. As for nursery education for disadvantaged two-year-olds, again, if all we are doing is taking away the care of children, instead of helping their parents to care for them, that could be a failed policy for the all the reasons I have said.

Tony Dolphin:  I am very reluctant to answer, too. It is a false choice. I am not an expert in many of these areas; I am an economist, and my experience is in savings and asset building, not in the best way to help pregnant mothers or children under two who are disadvantaged. There are obviously lots of other things—£500 million-worth—that could be cut. When the Chief Secretary to the Treasury announced this policy, said that his reason for getting rid of child trust funds was because it was wrong to borrow to give an asset to a child. He was not actually comparing this with any other item of spending at all. He was taking the opposite view and saying, “This is money we are borrowing to give to children.” I disagree with that as well, because he is hypothecating borrowing to a certain line of spending, and that is something that we have never done in this country either. I just think it is wrong. There is £500 million-worth of other stuff to cut; I am sure that I could find you £500 million-worth of things, outside of your list of seven, that I would happily trade for child trust funds.

Q 266

Sheila Gilmore: One of the issues that successive Governments have been criticised for is not taking a long-term view of how you resolve these problems. Those people who have advocated early intervention also said how important it is that we have consistent long-term policies, not short-term policies. I am thinking, in particular, of the recent cross-party work by Graham Allen and Iain Duncan Smith on early intervention and the importance of taking a long-term view. To what extent is the child trust fund able to contribute to that long-term perspective?

Sian Williams:  I think that’s exactly at the heart of the matter. It is recognising that, over the lifetime of a child trust fund account for an individual family, they can make contributions as and when they can, and that builds up opportunity in the form of a cash account for a child to make some serious choices about their future when they reach 16 to 18. It is about empowerment and recognising that while we can try to tackle long-term unemployment, and long-term issues around inequalities in income, health and education opportunity, we could create an opportunity for a child to have a wider range of choices, and the family could contribute to that; it does not all have to come from the state, but the state can support that choice. That is a long-term strategy. Are we now saying that we cannot afford to invest in the future?
For me, the nub of this matter is lower-income families, children at risk and those who do not have strong family support mechanisms. I am not going to argue in this economic climate that we need to protect the child trust fund in its entirety, but I am concerned that in five or 10 years’ time, we will have done nothing to tackle the inequalities that already exist and are worsening. We know that they will get worse. If you look back at every recession, we see that inequalities widen. If you look at the reports from King’s college, London, you will see that that matters to everybody, not just the poorest people but also the most well-off in society. This is part of a long-term solution.

Tony Dolphin:  Again, I would agree with everything that was said, but I would add that when looking at savings policy—this applies to pensions, the child trust fund and any savings—evidence suggests that stability is to be welcomed. One of the many things that put people off saving is the continual chopping and changing of the rules. We are drifting slightly off the point, but any survey of why people do not save enough for their pensions will tell you that there is no trust that the rules will not change between now and when someone retires, and that the savings might not be worthless. Changing things like the child trust fund, and chopping and changing the rules, affects the behaviour of people who are saving for their children, and it will also affect the behaviour of people saving for their pensions.

Dr Samantha Callan:  I was very involved in writing the book that you mentioned entitled “Early intervention: Good Parents, Great Kids, Better Citizens”. The clue is in the title. Graham Allen looked at early intervention in Nottingham, and there was a kind of circle of interventions at different points over someone’s life course. You do not just do stuff in the first one and a half to three years, because there are all the children who have already come through that phase. All the interventions that Graham is working on in Nottingham are about helping young people to prepare for parenthood, if they are at a later stage in their life course.
This will never be the case, but if there were money coming out of our ears, the child trust fund is yet another thing that could be in place to give some money to people who would not have that asset. However, I keep coming back to the point about whether that is sending the message that we want to send. People are getting a lump-sum, gratis payment, but we actually want children to learn about working for a living and about financially responsible behaviour.

Q 267

Fiona Bruce: Dr Callan, the statistics show that one in four young people have families who are not engaging with the process. I would be very interested to know whether you have evidence for something you said. It has been my suspicion that those on the lowest incomes and those who most need to engage in financial education are the ones who are not doing so. What evidence do you have for that?

Dr Samantha Callan:  As I said, in the savings accounts actually opened by parents, 99% have not received the maximum funding available, so they were therefore not those on the lowest incomes. It became a fairly passive system of, “The Government will do it for you.” That is my main plank of evidence.

Q 268

Fiona Bruce: Thank you. You also indicated that one of the best investments in a young person’s life, and perhaps one of the best ways of tackling future inequalities, is to give sound financial advice. Do you feel that we do that adequately?

Dr Samantha Callan:  It is patchy, and when you take away strictures on schools as to what they should do, it could obviously become even patchier. There is some amazing voluntary sector provision, and there are people such as Shirley Conran. The market is beginning to be populated by people saying, “The schools aren’t doing it well enough.” But even if the schools were doing it stunningly well, what about the kids who have opted out of school? Are we really ensuring that they still get that imparted wisdom? That is why pupil referral units should be doing financial education and giving hard skills to excluded children who go through entry-to-employment. We need to ensure that at any point when young people are receiving education out of the mainstream. That is an important place to put in those skills.

Q 269

Fiona Bruce: One more question, if I may, Mr Howarth? The child trust funds cost us £500 million a year. Some witnesses have given the view that, despite its being a universal benefit, much of the money, potentially millions of pounds, goes to young people who already have a nest egg, but that is a price worth paying, so children from low-income families receive what you called a “handout” at 18, although they may have had no engagement with the process on the way. Do you think that that is a price worth paying, or should we be looking to invest the money differently, or at least invest what money we have, bearing in mind our financial constraints?

Dr Samantha Callan:  I think we are seeing a major reconfiguring of the welfare state, in which we are getting away from the idea that we have to have universal benefits so that people do not feel stigmatised—we have paid our taxes, therefore we can take a slice out of the welfare state. That thinking is more and more outdated. Therefore, I do not think that it is worth while. We have to be far more targeted and sensible with public finance.

Fiona Bruce: Thank you.

Q 270

Yvonne Fovargue: I have two questions. I understand that the child trust fund provides an asset, but, equally, it is supposed to get engagement with financial institutions. We have heard that a lot of parents do not engage with financial institutions—there is a fear of them. Do you feel that by making the child engage with financial institutions at the age of 18, the child trust fund will put them in a better position than their parents are because they will lose their fear of financial institutions?

Tony Dolphin:  It is an aspiration of child trust funds. Ask me again in 12 years’ time and I might be able to give you an answer on whether they have achieved that aspiration. I have always been more sceptical of the financial education and engagement arguments for child trust funds, albeit, as you will have gathered, I am a strong supporter of them for other reasons. On financial education, yes, the child having a fund that you can point to as an example will help with savings and interest rates, but financial education is about a lot more than savings and interest rates. It is about debt, borrowing and managing a bank account so you do not go overdrawn and pay fees and penalty charges. The child trust fund cannot help with that.
Will it help engagement with a financial institution? Again, I am sure that opening a bank account and paying in your first pay cheque or benefit cheque will do that as adequately as a child trust fund. The honest answer is that we will not know until it has happened.

Dr Samantha Callan:  It is very top-down as well. It is a Government-led thing, but why should we not be encouraging financial institutions to do superb marketing to young people? That would take it away from its all being down to the state.

Sian Williams:  I think the primary purpose of the child trust fund should not be seen as engagement and education in that process, because it is far too passive to have that impact. I have seen some fantastic programmes, our own and other people’s, which encourage interactive engagement around financial services and issues and money management. For young people in Britain in 2010 and 2011, you would be better off with a computer game or a game at school, or a My Money week or MyBnk going into schools—those things that the voluntary and financial education sectors do extremely well. Engaging with financial services is much more about balancing your books daily and thinking about the future.
The truth is, it is not simply young people who struggle to engage with financial services. I hope that we will move on to talk about the saving gateway as well. From the saving gateway pilots, we know that many letters landing on the doorsteps of saving gateway clients look as though they come from the taxman, and no one willingly opens a letter from the taxman. We did a lot of work around the saving gateway and the child trust fund to try to explain to providers that if they want to engage people in financial services and financial issues, they need to do it in a way that means something, and is not off-putting. With the child trust fund, I do not think that in itself, it is an effective way of tackling the lack of engagement with financial planning and financial services with young people and adults in this country. It is an essential element of building up an asset base for disadvantaged children.

Q 271

Yvonne Fovargue: Can we return to the asset base? What evidence is there, if any—including that from other countries—of the difference that holding an asset makes to behaviour at age 18? Does having an asset make a difference? Do people behave differently when they have one?

Sian Williams:  In terms of making choices?

Yvonne Fovargue: Yes.

Sian Williams:  Absolutely. I cannot quote studies off the top of my head, but we work with young people. For example, with education maintenance allowance, which we are looking at being cut, we have conversations on a daily basis with young people, who are asking: how am I going to manage my studies? How am I going to make sure that at the end of my EMA I can move to earning my own income now that I am engaging with money in a proactive way? I agree that we do not want to send out a message that people can rely on handouts, which is a disempowering process. But that is very different from saying that we are trying to address inequalities. That is why I keep returning to the fact that I am not arguing the case for a universal child trust fund; I am arguing the case for addressing inequalities.
In the States, for example, there is much higher investment, on a personal level, in philanthropy and donations. Some fantastic programmes are run there around individuals making the match funding that we make here in the child trust fund for young people. Because that is done on an individual basis, you see some really interesting stories coming through.
We see that much more there than we do here, because it is a blanket state process here, but in the States it is done on an individual basis. You see some really interesting stories about the choices that people thought they could not make, and then when they have that asset, those choices suddenly become open to them and lives change. Without sounding too visionary: lives change when people have assets. That is the whole ethos that our society is built on—when you have some assets you can make decisions and choices.

Tony Dolphin:  The child trust fund is unique internationally, so there is no evidence of what that sort of scheme will do to children at age 18 and whether having assets changes their lifestyles and life chances.
A lot of schemes are run in the US, where the campaign for asset-based policies has been much more grass-roots and has developed over many years with lots of pilot and trial schemes. A popular one is an individual development account, which encourages people to save by providing matching assets. There is a lot of evidence from those studies—I cannot quote off the top of my head, chapter and verse—that shows that people who have built up an asset through savings in such accounts are more likely in later life to own a business, to own their own home, and to have gone through some training or other education that gives them higher potential earnings. There is a lot of evidence from the US that this works, but that evidence is in the case of younger adults rather than children and, as I said, no one else has tried child trust funds before.

Dr Samantha Callan:  If you are already on even the bottom rung of the ladder, having an asset can help you claim, albeit soft and slowly. However, we are particularly concerned about people who are not on the ladder at all, and who have low capacities. We talked a lot before the election about broken lives. I am concerned that for people with broken lives—who have addicted parents, have addictions themselves, or have educational failure—maximising the benefit of an asset must feel like climbing Everest. As I say, if you are on that bottom rung, being from a poor background, but without those other disadvantages, perhaps you can maximise the benefit of it, but is it necessarily helping those who are most vulnerable? I am not convinced.

George Howarth: Thank you. I will bring in Paul Maynard to ask the last question on this section and then I will move on to the saving gateway. I think Kerry McCarthy will be asking the first question about that.

Kerry McCarthy: I am doing the health in pregnancy grant.

George Howarth: Sorry, it was Sheila Gilmore.
We have very little time left to cover the rest of the Bill, so I request those asking questions on the next section—and, indeed, asking the last question on this section—to make them well-targeted and short. It is not that you have been prolix in your responses, but could the witnesses please bear that in mind?

Q 272

Paul Maynard: My question is very much to the point. What role has the child trust fund played in the financial education of children at primary school level?

Sian Williams:  To my knowledge, very little, if any.

Tony Dolphin:  Yes, but remember that the oldest child with a child trust fund has only just turned eight.

Q 273

Paul Maynard: That is why I said primary school level.

Dr Samantha Callan:  I do not know the answer.

George Howarth: I didn’t realise that my words would have such a profound effect.

Q 274

Sheila Gilmore: I want to ask about the saving gateway, with which I understand that Sian, in particular, has been involved. Would you start by saying what that involvement was and what your view is of the saving gateway proposal?

Sian Williams:  We were involved in looking at why it might be a good programme, in testing ideas around it through a pilot and, finally, in being contracted to be a regional trainer to roll out and publicise it. Sorry, I have forgotten the second part of the question.

Q 275

Sheila Gilmore: What is your view of the saving gateway as a means of assisting low-income families to save for the future?

Sian Williams:  The potential is that the saving gateway, as a concept around tempting people away from believing that there is no way to save or to find money to do things, actually has a real impact and a real benefit. It means that making a small sacrifice by finding something from my budget to save brings me something greater back. There is potential in that, but there are also some serious potential flaws in the programme. We severely underestimate resistance in every part of the population to changing our financial behaviour. The education programme that was going to be linked to the saving gateway savings mechanism was extremely important. I hoped that, through the saving gateway, we would be engaging families in discussions of their choices about money for today and for the future.
I saw the saving gateway as having two outcomes. Although I have just said that, in my opinion, the child trust fund played no role in educating young children about money, I believe that the saving gateway would have played a role in creating a specific opportunity for conversations with low-income families around choices on what they spend today and what they save today. The other outcome that I was looking for was that, through this scheme, low-income families would be significantly encouraged to save. For me, the crucial factor is not only building up a savings base, but providing an alternative to high-cost credit.
We run the illegal money lending team for London. I see the damage from people having to access high-cost credit to live so as to compensate for some blip, which might be the loss of a job, the loss of casual earnings, a problem caused by the overpayment of benefits being clawed back, illness in the family, the cooker blowing up or anything. With even a small pot of money, a family could choose to go to that first, or could use that to take to a credit union to access low-cost, or lower-cost, credit rather than being forced to use high-cost credit. That, for me, had a significant potential to change the long-term flow of money within a family. That was really important to me. There is an asset base, there is education, but there is also giving people choices around where they get their money to pay for things today. They would have this little asset built up that they could use, because they could take money out of the saving gateway pot and put it back in. That was the great thing about it—the money was not locked in, the system was flexible.

Q 276

Sheila Gilmore: One of the criticisms that was made on Second Reading was that, in the pilots at least, there was limited involvement from providers, which limited access and the outlets or inlets for people to go to. One of the proposals was that the link could have been made with post offices. I was interested in your comments on ease of access being critical.

Sian Williams:  The saving gateway as it stands is not perfect. I would change many things about it. I am in favour of the fundamental concept of working with people to build up a savings pot to change people’s behaviour. One of the things that we see on financial exclusion—this applies not only to the saving gateway but to so many aspects of accessing, using and managing money in this country—is that, despite the common goal, too many people are excluded from good financial services. If you are going to make a scheme such as the saving gateway relevant and accessible, you have to have as many access points as possible. I absolutely agree with that.

Tony Dolphin:  Perhaps I could add a postscript to that. We have been doing some work recently with people in low earner families—not those on the lowest incomes. These are people who have the potential to save and we have been working to find out what would make them save. One of the things that we were interested in was where they would like to have their savings. There is a very clear generation gap around the age of 40. If you ask anyone over the age of 40 that question, they will say the Post Office. If you ask anyone under 40 that question, they will say the supermarket. If you could get those two providing a financial product, you have cracked it.

Sheila Gilmore: Some supermarkets have post offices.

George Howarth: Does anyone have anything further to add?

Q 277

Kate Green: I just wondered whether you could specifically comment on how important having a matching mechanism in the saving gateway was, and whether it was necessary for the matching level to be pitched at the level that it was? If it had been lowered, would it still have attracted some positive behaviour?

Sian Williams:  Our experience is that for many people—irrespective of income—you have got to see a significant benefit to change your behaviour. Just knowing something factually is not enough. Behavioural economics comes into this with real power. All our experience is that that matching element really helps drag people out of thinking “I can’t save. I’m not a saver. I’m not the kind of person that any financial institution would have as a client,” to “You know what, that money really makes it worth altering the way I think.” It will not work for everybody, but it will work for a significant number of people. Given that we do not advocate that any one policy will tackle poverty or financial exclusion, it is a useful element of a toolkit. If you start to move below that level of the matched funding—the 50p in the £1—you will see a tailing off of its impacts. You will still reach some people with a level of 25p in the £1, but you will not affect as many people. That is a given on anything like this.

Dr Samantha Callan:  Because the matched funding is so high, other savings products were uncompetitive in comparison. There was not much continuity to move on to other products. Some 98% of those opening a saving gateway account already had an existing form of account. There were three things that they were looking for in the pilot. Did it get people to start saving? Did it get people to start formalising their savings, instead of it just being under the mattress? Did it increase financial education? When you look at the saving gateway 2 pilot, it is clear that there were disappointing results on those three areas. It rewarded people who already had savings at an uncompetitive level.

Q 278

Sheila Gilmore: I might be completely wrong, but my understanding was that the range of people who were allowed to take part in the saving gateway 2 pilot was quite wide. It included not only people who were eligible through being in receipt of certain benefits, but people who received quite high incomes. It included individuals who earned up to £25,000 and families who earned up to £50,000. I can see how the potential shift that you described might happen, with people saying, “I won’t put the money in the Post Office or the bank. I’ll put it in the saving gateway because that is giving me a better rate of interest.” However, my understanding was that the saving gateway rollout would apply only to people on benefits, who do not have those sorts of choices.

Sian Williams:  That is right.

Q 279

Kerry McCarthy: How successful does each of you think the health in pregnancy grant initiative has been?

Dr Samantha Callan:  I know the Barker hypothesis very well: that reduced foetal growth is strongly associated with a number of chronic conditions later in life. However, by 25 weeks, so much has already happened. Your iodine levels and folic acid levels need to be up way before then, with the iron obviously continuing throughout the pregnancy.
There was absolutely no guarantee that the grant would be spent on nutritious food. I had a look at that great oracle, the Mumsnet website, where the chat resounded with people talking about the health in pregnancy grant. People said that they were using the money to go to a health spa or to buy an Amazon Kindle. One person said, “I feel terribly guilty. I was planning to spend my pregnancy grant on a trip to a spa so that I could have a baby bump massage, a manicure and a pedicure and just relax for a bit, but everyone else is saving their money for the baby.” In other words, she felt guilty because she was spending the money on something that was somewhat to do with health in pregnancy, but many other people were holding on to it for when the baby came along. I am just trying to give a flavour of how incredibly badly targeted it was. One woman said, “I bought some really nice shoes—and I’m not talking booties—to treat myself.” Some said, “I pay my taxes so I should jolly well get it,” whereas others said, “I didn’t claim mine because I just couldn’t justify it to myself. For one, it takes so much paperwork.”

Q 280

Kerry McCarthy: Is Sian’s experience of people getting the health in pregnancy grant in Tower Hamlets that they spend it on spa treatments?

Sian Williams:  I start by saying that I am in no way an expert on the health in pregnancy grant. I cannot comment from a detailed knowledge of the grant. I would say that the majority of low-income earners in Tower Hamlets will not be on Mumsnet. They will be digitally excluded and many of them will not even speak English. Although I am not going to set out any clear and reasoned arguments for the health in pregnancy grant, because it is not my area of expertise, I simply say that many families will be using any additional money that is paid to them to support the health of their family in some way. I will leave it there, if I may.

Tony Dolphin:  I am no expert either, but the case for it being means-tested rather than universal has already been eloquently made.

Q 281

Kerry McCarthy: The suggestion has been made by Samantha that the payment at 25 or 26 weeks is too late in the day. Presumably you think that if it is still paid, it should be paid earlier?

Dr Samantha Callan:  I do not think it should be paid, frankly. If there is a problem with nutrition in pregnancy, it will not be just about money. Often it is about not knowing how to cook nutritiously. I am not saying that all poor people are rubbish housekeepers, but quite the opposite—some of them would put us all to shame. Some of the schemes that help the most disadvantaged families teach them cooking and about all sitting down together to have a meal. It might sound a bit paternalistic but, again, it is about the early intervention. It is about what we do to help parents give their children the best start in life. A lot of them will not have done cooking in school. A lot of them will not have learnt from their mums or dads how to cook. There is so much more we could do to make sure that money is spent on health food.

Q 282

Kate Green: This morning we heard from other witnesses that in the later stages of pregnancy women might spend the money on other things to get ready for the baby. We had evidence from the National Childbirth Trust, for example, that its second-hand shops were busy with mums-to-be spending that money on prams and things that they would need when the baby first arrived. It has perhaps been an unfortunately named grant. What would be your perception of its efficacy in supporting mothers at a time when costs might rise? Do you feel that it is the right timing to try to help with some of that extra expenditure or would something earlier or later have been preferable?

George Howarth: Before the witnesses answer, to enable us to get through all of the business in the required time it might be as well to take two questions together and then to ask the witnesses to reply accordingly.

Q 283

Sarah Newton: Are the witnesses aware of the Healthy Start programme, which is well supported by health care professionals and is very much targeted at maternal health? If so would they like to comment on its effectiveness?

Sian Williams:  I feel very passionately that we should speak only on issues that we are expert in. This is not my area of expertise.

Dr Samantha Callan:  I completely agree about digital exclusion and so Freecycle and things like that that would give parents access to low-cost or free second-hand baby care products would not necessarily help the poorest. But how about if you could take along your old pram to children’s centres? I would love to donate my old pram somewhere because none of my middle class friends want it, frankly, because they want to buy their own brand new pram. Rather than it being about the Government giving people money so that they can be philanthropic—although I do not think it is particularly philanthropic to do an NCT second-hand stall, but we tend to constantly think that the Government must provide—why not have a big society perspective that says, “Well, how about communities contributing far more to enable people to afford stuff for their babies?”?

Q 284

Kate Green: The other point I wanted to develop was on the healthy diet. As I say, I feel that the grant is not particularly helpfully named, but what we also heard this morning was that by delivering an extra lump of money to families, it supported particularly low income families to spend their income in other ways, including on the essentials of diet, heating the home and that kind of thing. Given that I think Sian has said that perhaps some of these benefits could have been more targeted, do you see a place for extra financial support in the late stages of pregnancy that enables families to meet the outgoings that are associated with being a mum-to-be?

Sian Williams:  One of the problems that we still see despite all the laws is that pregnant mothers are most at risk of losing employment. Anything that boosts a pregnant mother’s income at a time when she has increased expenditure can only be helpful. On the other hand, I also believe that it needs to be targeted on those who need it. One of the difficulties about all of the three programmes that we are discussing today is that they receive bad press because they are not well targeted. That really matters to people in today’s climate, because people feel every pound that is being taken away from them. It does not matter whether it is being taken from them through heavier taxes on a well-paid income—or a low-paid income—or being taken from their benefits. So targeting is very important.
When I look around Tower Hamlets and I see the number of young mothers on very low incomes—20,000 people are on less than £15,000 a year—that really worries me. I am worried about the health of the child and about the options available to that family. Are they living in good accommodation? Is it well ventilated? Are they living in damp? Can they turn the heating on? I support anything that supports those basic needs, which include good nutrition, but I do not realistically expect that young mother to go and spend all of that money on food. She is not going to do that. The grant means that she will increase the money that she spends on food by a percentage, but she will also be able to turn up the heating, or take the bus to the health centre, rather than having to walk.
I see a lot of people who miss appointments because they cannot find the bus fare, or because they cannot take the time off work. Again, I am not an expert on the health in pregnancy grant, but I know that within Tower Hamlets any money that you take away from a low-income family, particularly a family that is about to have another mouth to feed, will be keenly felt. I cannot comment on the timing of the grant.

Q 285

George Howarth: We have now exhausted the questions, and no doubt we have exhausted the witnesses, too. Before I close this session, is there anything that any of the witnesses want to say—they should by no means feel obliged to say anything—that they feel they have not had the opportunity to say in answering our questions? If there is, they should feel free to do so as briefly as possible.

Dr Samantha Callan:  I have read that—this is not just Mumsnet, which, you are right, is quite a middle-class website—some people are spending their health in pregnancy grant on a doula, which is somebody who is just a friend while you are giving birth and during the first few weeks. In other words, they were saying that it is not food, but support that they need. Maybe they are on their own, or their partner or husband is not being very supportive, or whatever, but those women actually wanted to spend the money on getting something much richer, having a friend around. I think that it is very valid to spend money on such community initiatives and other things that can really change the whole trajectory of life.

Sian Williams:  I would like to stress that my concerns about losing the child trust funds and losing the saving gateways are really about tackling inequality for very low-income and disadvantaged families. Outside of these three particular programmes, there are three key issues that we need to think about.
First, there should be an asset base, or at least an opportunity to draw on a grant or low-cost loan, for young people who are making life choices at 16 to 18, and longer if possible. We have just seen the loss of the EMA and we are seeing higher tuition fees, so the gap is going to grow. Although we are not a socialist country, we are a country that believes in equal opportunities, and those opportunities are becoming ever more unequal. So I feel passionately that, although we may lose the child trust funds, we should at least give some consideration to how we address that gap.
Secondly, we should recognise that low-income families, on the whole, manage their money quite well. There is still a long way to go with financial education, however, and I would really like people to look at rethinking the national curriculum to include financial education for every child. We could change this country in a generation with well targeted financial education at the school level.
Lastly, I would like to look at improving access to affordable credit. When low-income families need to dip into credit, there should be a low-cost system that does not lead to either the threat of having their legs broken or being abducted by a loan shark, which we deal with on a daily basis, or the less serious, but still long term, implications of repaying interest over such a long period that they never get out of debt. Looking at, for example, improving credit union access and affordable credit access is key to tackling some of the inequalities that will be worsened by the removal of the programmes.

George Howarth: Thank you very much. We will now move on to the next set of witnesses.

George Howarth: The Minister needs no introduction to the Committee on the grounds that he is a member of it, but perhaps Mr Little would like to introduce himself.

Matthew Little:  My name is Matthew Little, and I am the Bill manager for this Bill.

Q 286

David Hanson: Good afternoon, Mr Little. May I start by asking you, Minister, what you have learnt from the evidence sessions that might help to influence you over the next two days’ consideration of the Bill?

Mr Hoban:  Clearly, a variety of points have been raised in the evidence sessions. For example, Carl Emmerson from the IFS raised some issues about the effectiveness of the child trust fund and the savings gateway, and we have just had a very interesting session on the health in pregnancy grant. I have read Committee Hansard,and some interesting points have been raised, but they are points that we have been through in the development of this policy process.

Q 287

David Hanson: I want to focus on a couple of key issues about the successor product to the child trust fund, because that would be key in our consideration if we were taking away a particular provision. What is your assessment of the concerns of Martin Shaw in the evidence session, regarding the establishment of the junior ISA?

Mr Hoban:  In terms of the timing of when it opens, or in terms of how many people are taking it up?

David Hanson: In relation to both the gap, and the cost of the investment.

Mr Hoban:  In terms of the gap, let me be really clear. We hope to introduce the junior ISA next autumn, but eligibility will start from the moment the child trust fund terminates. So, there will be a savings vehicle available for children as soon the CTF is turned off. That is something that we are very keen to ensure, and it was one of the factors that drove me when thinking about the policy design. It was certainly a concern that was raised with me when I met stakeholders earlier this year to discuss the replacement of the child trust fund.

Q 288

David Hanson: We have been told this week in evidence sessions that as well as the press release you put out on the Second Reading debate, consultations are going on, even this week, for the first time with providers, about a replacement for a scheme that will end on 3 January. Do you think that it is fair to end the scheme before consideration has been given to nailing down all the nuts and bolts of the replacement scheme for that date?

Mr Hoban:  In many areas of policy you end up with actions being taken in parallel. We had an informal consultation with stakeholders prior to the publication of the document last week, and we are in a good place to ensure that there will be a replacement in place by autumn next year that will apply to all children from the date that the child trust fund is turned off.

Q 289

David Hanson: What is the cost of establishing the junior ISA?

Mr Hoban:  The cost is relatively low because it uses technology that is already there within HMRC.

David Hanson: Can you give us a figure?

Mr Hoban:  I think that the estimate that we have been provided with is less than £500,000, which is a significant saving for the taxpayer compared to the £500 million per year that we are saving through turning off the child trust fund, and it will go some way towards tackling the budget deficit.

Q 290

David Hanson: Perhaps you can clarify that for the Committee. The contributions to the child trust fund have already been reduced, so the cost of abolishing the contributions and the fund from January is not £500 million a year.

Mr Hoban:  No, but we are looking at the entire package of the measures with the child trust fund—

Q 291

David Hanson: Could you indicate to the Committee the cost of this Bill ending on 3 January 2011?

Mr Hoban:  This Bill will reduce the full-year spend on the child trust fund by £50 million.

Q 292

David Hanson: Exactly. So the £500 million figure that has been bandied about the Committee in relation to this Bill is not accurate. Is that correct?

Mr Hoban:  Well, no. The policy package that we announced earlier this year as part of the coalition plans for tackling the deficit was £500 million.

Q 293

David Hanson: But could you confirm that the cost of this Bill is less than £500 million, and is about £50 million a year?

Mr Hoban:  I have already said that.

Q 294

David Hanson: Exactly. I just want it on the record, because colleagues in the Committee have been quoting the £500 million figure, which is not correct.

Mr Hoban:  We must look at this in the round. What we have done is take a two-stage process to achieving our goal of cutting costs by £500 million. That first stage was in the regulation that we dealt with in July this year, and this completes that process.

Q 295

David Hanson: Can I just ask one final question, Mr Howarth? What weight do you give to manifesto commitments in policy decisions?

Mr Hoban:  We are part of a coalition. Given the outcome of the general election, it was right to discuss the coalition platform. I am pleased that my hon. Friends the Members for Bristol West and for Birmingham, Yardley debated scrapping the child trust fund on the manifesto platforms. We helped them deliver that.

Q 296

David Hanson: For the record, Minister, could you say what your party’s manifesto commitment on the child trust fund was at the general election?

Mr Hoban:  I think the hon. Gentleman placed that on the record on Second Reading and has also tried to reflect that in his amendments, which we discuss later on. We wanted to keep the child trust fund for the poorest third of families, but we have been unable to do so. That is a consequence of the costs of reducing the deficit.

David Hanson: Could you then therefore—

George Howarth: Order. Mr Hanson, you asked to have one final question not a penultimate question.

Q 297

David Hanson: My final question then is what would be the cost of maintaining the child trust fund as per your manifesto commitment?

Mr Hoban:  I have not got an assessment of that cost with me, but looking at the challenge we face in tackling the huge budget deficit we have and the amount of money we are spending on interest on a daily basis, we concluded that the best thing to do to make progress on tackling that deficit was, sadly, to scrap the child trust fund.

John Hemming: Much as we argued to scrap the child trust fund in the manifesto, what has not arisen in evidence is a question about whether the model of the child trust fund without funding from the Government is useful as an alternative to the ISA model. The child trust fund model is locked in and the ISA model is an extension of ISA. What are the costs of continuing to allow people to open new child trust fund accounts with no money?

Mr Hoban:  On the point about the lock in, it is our intention that the junior ISA will have a lock in until the age of 18. It replicates that feature of the child trust fund. If you kept the child trust fund system going as it is as the moment, you would end up issuing a unique reference number for no discernable purpose to every child who is born. You need to maintain those records over 18 years. I think you would find that you ended up keeping a system going that costs about £5 million a year. If I compare that with moving to a voluntary system where no one is required to contribute to the costs we anticipate for our scheme, I do not think that that represents good value for money for taxpayers.

John Hemming: In essence, because the junior ISA will have lock in as well, there is nothing to be gained by people in having the child trust fund model?

Mr Hoban:  No, I do not think so. We have taken the best aspects of child trust funds.

Q 298

Yvonne Fovargue: On the junior ISA, we have heard comments in the evidence session that it will benefit higher rate taxpayers, but that it will not be of benefit to low-income non-taxpaying families. Would you like to comment on that?

Mr Hoban:  The important thing is that there is a vehicle designed to encourage people to save. Encouraging people to save is not just about tax incentives; the money will be locked in. We want to make sure that it is accessible to low-income families, so it is a very good model. We can deliver some of the objectives around encouraging saving without encouraging significant costs to the taxpayer.

Q 299

Yvonne Fovargue: In the evidence sessions yesterday, some of the witnesses—particularly those from, I think, 4Children—were saying that the measures would increase inequality. What are your comments on that?

Mr Hoban:  This does raise a question about how effective the child trust fund is in reducing inequality. We know that there is a very poor evidence base for that. It has not been established sufficiently long to determine what the effect is on tackling inequality. But we need to bear in mind that, out of the CTFs opened by low-income families, only 13% received contributions from their parents or from others, whereas for better-off families that figure is 30%. In itself, it is hard to say whether the CTF will actually reduce inequality.

Q 300

Yvonne Fovargue: You have mentioned that there has not been enough time to conduct an impact assessment. Have you considered delaying this until you can have an impact assessment on all the proposed measures?

Mr Hoban:  It is an easy thing to put off difficult decisions. If we chose not to scrap the child trust fund, we would have to find another £500 million a year, by cutting spending somewhere else, raising taxes or encouraging borrowing. Given the scale of the deficit and of the challenge we face, we must take difficult decisions now to tackle them. We cannot put problems off until tomorrow. If we delay resolving some of those issues, the people who will pay the highest cost will be the poorest. That is something that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) commented on before becoming Prime Minister.

George Howarth: We have two more topics to cover in this evidence session, and two other Members—Sarah Newton and Sheila Gilmore—have indicated that they want to ask questions on this topic, but they will have to be very brief.

Q 301

Sarah Newton: My question is a good bridge to the next one, which is on the saving gateway. With regard to promoting savings, especially among people on low incomes, who traditionally do not save, we have heard a lot of evidence about the importance of access to the places where they save. We have found universally that they need a local and trusted organisation that offers value-for-money products. Given the coalition Government’s commitment to the post office network, which is welcome, what discussions have you had with colleagues about developing low-cost financial services through that network?

Mr Hoban:  That is a matter for the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the hon. Member for Kingston and Surbiton (Mr Davey). You make an absolutely key point about access points. One of the problems with the saving gateway account was the number of access points at which it would be delivered, which was one reason for our decision to scrap it. We found that no building societies would sign up to deliver it and that only the Royal Bank of Scotland and Lloyds would offer it. The Post Office wanted subsidy from the taxpayer for offering it, and only credit unions that did not have national coverage were prepared to go down that route. We did not feel that there were not enough access points available to enable it to reach out to as many people as it should have done. That is one reason why we chose not to proceed with it.
People have come forward with ideas about how to use the Post Office more effectively. The British Association of Credit Unions has put forward proposals for using the Post Office as a way of expanding the number and reach of credit unions. The decision on whether to pursue that is one for others to make. When we design products to meet the needs of those on low incomes, we must ensure that their design encourages take-up.

George Howarth: We will now move on to the saving gateway.

Q 302

Sheila Gilmore: Both the saving gateway and child trust fund are long-term policies designed to encourage people on low incomes to save and facilitate them to do so. Rather than just saying that because many providers were not prepared at the outset to come in on it, did you give any consideration to allowing it to get started so that you could build up a network? You mentioned one or two potential changes, such as the credit unions’ discussions with post offices. Rather than saying, “Let’s not have it”, why not allow it to start and to build up once people see it begin to work?

Mr Hoban:  Given the limitations on access, the cost and the fact that it has not yet started, we decided that it would be best not to continue with the policy initiative. That is why we have decided to scrap it in the Bill. There is a good question about how effective it would have been. There were two pilots on it, which were extensive. It is interesting to note that the previous Government made the pledge in their 2001 election manifesto, so clearly they had some time before the Bill was introduced and there were concerns about how effective it would be. Carl Emmerson suggested on Tuesday that it would not necessarily deliver high levels of savings.
There are serious question marks about whether it would be effective in increasing saving. We recognise the need to increase saving among families on low incomes. That is one of the reasons why we support the annual financial health check to give families more advice about managing their money. That is something that the industry will fund by CFEB, so there are other initiatives that we have in place that will encourage people to save. There are other measures coming further down the track, such as auto enrolment, a net that will encourage people on lower incomes to get access to pension savings for the first time.

Q 303

Sheila Gilmore: Given the restrictions on the roll-out of saving gateway, I do not think necessarily that the pension savings is an alternative. One of the merits of a saving gateway, particularly in relation to credit unions, was the incentive to save. The ability of credit unions to build up their savings and thereby improve access for people in some communities, which do have credit unions—admittedly, not all have yet—to cheap forms of credit is one of the things that can make a huge difference not just to people’s income, but their not getting into debt and not having to borrow at times of crisis. Do you not agree that to enable that to happen is particularly important if we want people to be able not to fall into a cycle of debt?

Mr Hoban:  That is a very important point. One thing that struck me when talking to credit unions is the number of people who have their benefit paid into a credit union account and actually leave some behind for a saving to actually provide a cushion against unexpected changes in their income. It does play back to a point that Carl Emmerson made on Tuesday that
“There was not any really strong evidence from the saving gateway that it led to more overall saving from lower-income households.”––[Official Report, Savings Account and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 18.]
It may be in a different pot from their current account, but that does not mean to say that they have actually saved more as a consequence.

Q 304

Fiona Bruce: What has come across to us from several witnesses is that financial education, particularly for young people, is patchy. I wondered whether your work on this Bill has led you to consider how we could improve on that in light of the fact that the financial savings education element, say of the child trust fund, is going. It has also been pointed out that only three out of four young people’s families engage with the savings education element of that, so we have one out of four young people potentially receiving no benefit at all bar what one witness called a handout at 18, which perhaps does not inspire savings at all—but rather the opposite. Have you considered how we can improve our service to young people to give them the best start in life in terms of financial management?

Mr Hoban:  This is something that I feel passionately about. I have seen a number of programmes delivered in schools that improve financial literacy. PFEG does a very good job. It is funded by the consumer financial education body to help its work. A lot of businesses support financial education projects in both primary and secondary schools. We cannot afford to wait until today’s five-year-olds are in their 60s to say that the job has been done on financial education. That is why we were very supportive of the consumer financial education body, when it was in the Financial Services Bill last year. We were very keen to see that set up. We were the first party that advocated the national roll-out of financial advice to tackle some of these problems, and to help people face them now. Education and school have an important role. There are plenty of people there to provide support, but it is a multi-generational issue that we need to tackle.

Q 305

Kerry McCarthy: During the evidence sessions that we have had, one of the main points of criticism—to the extent that there was any criticism—was the fact that it is not targeted sufficiently. It would be a better use of money if it was means-tested and went to families who need the money most. Was that under consideration at any point when you looked at introducing the Bill? You are obviously going down the road of means-testing child benefit to an extent. Many people see the health in pregnancy grant as an advance on child benefit before the child is born. Was the possibility of using that money more wisely under consideration, rather than axing the whole thing entirely?

Mr Hoban:  One thing you need to bear in mind when looking at these three measures is to recognise that you cannot look at them in isolation. For example, with health and pregnancy, there are other sources of funding available to those on low income who are pregnant. So we need to not just look at one measure in isolation, but take into account the broader ranges of financial support.

Q 306

Kerry McCarthy: But there are no other payments available to pregnant people that are rising to compensate for this being axed.

Mr Hoban:  In terms of the balance you have to strike in policy making, yes we are scrapping this. But it is an important contributor to tackling the deficit and there are other sources of funding available to those on low income who are pregnant.

Q 307

Kerry McCarthy: Such as?

Mr Hoban:  The Sure Start maternity grant is available. There is a voucher programme for food that starts at a relatively early point in pregnancy and, I think, carries on until the child is four years old, so there is other support. This is untargeted. It was not piloted. It was just introduced in the 2009 Budget. There is no link between receipt and what it is used for, and that was very well established in the last session. One of the advantages of the voucher programme is that it is clearly linked to nutrition.

Q 308

Kerry McCarthy: Several people said on Second Reading that you cannot trust women to spend it on the right things—you can’t trust them to spend it on their own health in pregnancy or on things for their unborn child. If that is the case, why are we not far more prescriptive about other benefits that are paid to people, such child benefit and winter fuel allowance? Are you suggesting that we go down the road of vouchers for everybody?

Mr Hoban:  It is clearly a grant that is designed to come with no strings attached. People can choose how to spend it. There has been a lot of discussion, now and in the previous evidence session, about how people might choose to spend it. I am just saying that there are more targeted means of support available than the health in pregnancy grant.

Q 309

Kerry McCarthy: But you are saying that that is a criticism—the fact that it can be spent on things that it is not designed to be spent on?

Mr Hoban:  It is a criticism that a number of people have made of it across the spectrum.

George Howarth: Harriet Baldwin.

Harriett Baldwin: The Minister just replied to the point I was going to raise.

George Howarth: Is there anything further you would like to say to the Committee, Minister?

Mr Hoban:  No, I am sure that I will have plenty of opportunity over the course of the next few days, Mr Howarth.

George Howarth: I will now suspend the Committee until 3 pm. We will resume in Committee Room 10 in the House for line-by-line consideration of the Bill.

Sitting suspended.

On resuming—

Clause 1

David Hanson: I beg to move amendment 26, in clause1,page1,line6,leave out ‘3rd January 2011’ and insert

George Howarth: With this it will be convenient to discuss the following:
Amendment 1, in clause1,page1,line6,leave out ‘2011’ and insert ‘2014’.
Amendment 10, in clause1,page1,line6,leave out ‘2011’ and insert ‘2016’.
Amendment 19, in clause1,page1,line6,after ‘2011’, insert ‘, and after 3 January 2012’.
Amendment 27, in clause1,page1,line8,leave out ‘3rd January 2011’ and insert
Amendment 2, in clause1,page1,line8,leave out ‘2011’ and insert ‘2014’.
Amendment 11, in clause1,page1,line8,leave out ‘2011’ and insert ‘2016’.
Amendment 28, in clause1,page1,line14,leave out ‘3rd January 2011’ and insert
Amendment 3, in clause1,page1,line15,leave out ‘2011’ and insert ‘2014’.
Amendment 12, in clause1,page1,line15,leave out ‘2011’ and insert ‘2016’.
Amendment 29, in clause1,page1,line17,leave out ‘3rd January 2011’ and insert
Amendment 4, in clause1,page1,line17,leave out ‘2011’ and insert ‘2014’.
Amendment 13, in clause1,page1,line17,leave out ‘2011’ and insert ‘2016’.
Amendment 30, in clause1,page1,line18,leave out ‘3rd April 2011’ and insert
Amendment 5, in clause1,page1,line18,leave out ‘2011’ and insert ‘2014’.
Amendment 14, in clause1,page1,line18,leave out ‘2011’ and insert ‘2016’.
Amendment 31, in clause1,page1,line21,leave out ‘3rd April 2011’ and insert ‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 6, in clause1,page1,line22,leave out ‘2011’ and insert ‘2014’.
Amendment 15, in clause1,page1,line22,leave out ‘2011’ and insert ‘2016’.
Amendment 32, in clause1,page2,line2,leave out ‘3rd January 2011’ and insert ‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 7, in clause1,page2,line2,leave out ‘2011’ and insert ‘2014’.
Amendment 16, in clause1,page2,line2,leave out ‘2011’ and insert ‘2016’.
Amendment 33, in clause1,page2,line4,leave out ‘3rd January 2011’ and insert ‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 8, in clause1,page2,line4,leave out ‘2011’ and insert ‘2014’.
Amendment 17, in clause1,page2,line4,leave out ‘2011’ and insert ‘2016’.
Amendment 34, in clause1,page2,line5,leave out ‘3rd April 2011’ and insert
‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 9, in clause1,page2,line5,leave out ‘2011’ and insert ‘2014’.
Amendment 18, in clause1,page2,line5,leave out ‘2011’ and insert ‘2016’.
Amendment 35, in clause1,page2,line8,at end add—

David Hanson: Good afternoon, Mr Howarth. That was a brave attempt from the Chair to talk us out this afternoon, just by listing the amendments.

George Howarth: Order. It is not the Chair who tables the amendments.

David Hanson: It is the Chair who selects them. I welcome you, Mr Howarth, and your co-Chair, Mr Streeter, to the Committee proper. We have had some useful evidence sessions.
My hon. Friend the Member for Bristol East and I intend to introduce a fruitful discussion with these amendments, which are designed to be helpful to the Government. It is always my intention to be helpful; I was as a Minister, and hope that I shall be as an Opposition spokesman. For the avoidance of doubt, I state that the Opposition have extremely strong views on the Bill. If our amendments to clause 1 are not agreed, we will vote against the clause, because we believe the child trust fund to be a valuable asset. We want it to be maintained, even in its slimmed-down form following its emasculation by the statutory instrument that was made in July. Having said that, I am pragmatic and will give the Minister and the Government the opportunity to reflect on our suggestions in this group of amendments.
The amendments would do one of three things. The lead amendment would give the Minister the opportunity to delay the implementation of the clause by order. There are also amendments that would delay the ending of eligibility for the child trust fund until either 2014 or 2016.
The first date of 2014 would allow for greater assessment of the economic situation and of how the deficit reduction plan was working before eligibility was ended. I will return to that point later. The second date of 2016 is after the final date for the next general election; helpfully, the Government have stated that it will be on 6 May 2015. That would allow Conservative Members—not Liberal Democrat Members, whom I exempt from this charge—to seek a proper mandate for the abolition of the child trust fund, given their manifesto commitment on the subject. The last election was on 6 May 2010; that is not that long ago, but they have already ditched the manifesto commitment as part of this Bill. The second date gives Conservative Members an opportunity to reflect on upholding what they were elected to do. I will also return to that point later.
I start by discussing amendment 26, which would amend the Bill so that eligibility for the child trust fund was not cut off on 3 January 2011. It would give the Minister the flexibility to meet his objective of ending the scheme—an objective that we oppose—at a date that he sets, by means of regulations made by the Secretary of State. There are two reasons for the amendment. First, it gives the Minister the opportunity to reflect on the evidence sessions and on the value of the child trust fund for many sectors of our society. Secondly, it is important that he reflects on the representations we have received on the gap that will occur between the ending of eligibility for the child trust fund and the introduction of the replacement ISA, which, on Second Reading, the Minister proposed introducing at some date before October 2011. He could fill that gap in several ways, and I want to reflect on those in our discussion. He has announced a new child ISA, and when he responds, I hope that he will give more detail and outline the nuts and bolts of that proposed ISA.
There are effective ways of filling that gap at the moment, and amendment 26 gives the Minister the opportunity to consider some of them. He could effectively keep the lower payments of £50 in place for children born after 3 January 2011, until the product is replaced in due course with the child ISA. He could end Government contributions but maintain the facility for parents to establish a child trust fund for children born after 3 January.

Sheila Gilmore: The rationale that appears to have been given for the abolition of the child trust fund is the need to reduce the deficit. We have heard a great deal from the Government about how, in their view, their plans will reduce the deficit within a five-year period— although I am not sure that I agree. On that basis, however, given that we are talking about a long-term programme, would it not be advantageous to be able to reinstate it in due course, when the deficit is reduced?

David Hanson: My hon. Friend makes a valuable point. All three sub-groups of amendments could give the opportunity to do that. Amendment 26 allows the Minister, by regulation, to end the child trust fund at a later date, which provides an opportunity for him to reflect on the alternative. The date of 2014 gives a three-year gap before the implementation of the measures in the Bill. I accept that that has a cost, but in theory, it could allow for some reflection on the economic circumstances over the next three years. The date of 2016 gives the opportunity for a total of five years before implementation. The Minister, rather than using the proposals to hit children’s future assets as part of the deficit reduction plan, could look at how that plan as a whole impacts on the economy and the Budget. That way, he would not necessarily have to use dogma to end the child trust fund scheme because he did not agree with it. All three options give the Minister the opportunity to reflect on the current role of the deficit, the progress in lessening the deficit, the replacement for the child trust fund and indeed, the commitments made in his manifesto.

John Hemming: Earlier, the right hon. Gentleman said that the Opposition would vote against the clause unless the amendments were accepted. Would they vote for it if the amendments were accepted?

David Hanson: I would have to reflect on that. [ Laughter. ] The hon. Gentleman asks a good question. If it meant that the Labour Opposition had amendments accepted that put in place a stop-gap for the next nine months, I would reflect on whether to vote for the clause. At the moment, we have nothing; the child trust fund will be abolished. If it meant that we had a three-year gap before abolition, I would certainly vote for the clause, in the hope that the economic situation would improve and there would be some reflection. If we had a five-year gap, I would hope that, in a general election, we would be returned, and we would be able to unpick this particular policy fiasco of the Government’s.
My first comment to the Committee was that we oppose clause 1 of the Bill. I also said—as the hon. Gentleman will see if he wants to look at Hansard tomorrow—that I am pragmatic in these matters. I want to see something of the child trust fund salvaged from this train crash. I believe, as the evidence sessions have shown, that the fund is a valuable asset, helps develop assets for people at the age of 18—particularly the poorest in our community—and has been valued by those who have used it. It has also helped to develop a savings culture as a whole.

John Hemming: On the evidence sessions, obviously it is not surprising that those who make a living out of providing child trust funds are enthusiastic about them continuing. What I did not hear—I wonder whether the shadow Minister did—is any evidence that they were getting a good return, beyond the charges levied on it, or any evidence that people were saving any more than they would have done otherwise.

David Hanson: The hon. Gentleman will reflect that before the child trust fund, savings were at some 18%, and they have now risen to 31%. We had this discussion when the original order was before Committee. There is different evidence as to how much people on lower incomes have been helped, but there has been, non-contentiously, a rise in savings, including among people on lower incomes.

John Hemming: I thank the shadow Minister for giving way again; he is being very generous with his time. The Royal College of Midwives has argued that if a family on low income have money available, they should spend it on improving their health. Does he disagree with that?

David Hanson: Again, the hon. Gentleman is giving an and/or solution. There is a potential argument for people spending their money on day-to-day living, but, equally, the child trust fund, as he will know, is not something to which individuals have to contribute. The Government have been contributing to encourage savings, and people can, if they have resources in their pocket, put some in for their children. Some do, and some do not. They can also put nothing in at all and leave that initial Government contribution to mature when the child reaches 18. They can opt in or opt out at different times in their financial cycle. It is a matter of choice. Individuals can choose when to put money into their children’s futures. What is uncontroversial from today’s discussions is that the scheme generates greater saving across the board than there had been before it came into effect.

Yvonne Fovargue: Does my right hon. Friend agree that in Tuesday afternoon’s evidence session, people who were not providers, such as 4Children and Scope, agreed that it was absolutely too soon to abolish the scheme? This group of amendments relate to that.

David Hanson: Indeed. The scheme has been operational for a relatively small number of years. The children who have child trust funds are relatively young because of when the scheme commenced. I should perhaps have declared an interest, Mr Howarth, because I have four children, three of whom are older, but the fourth is aged 7 and is in receipt of a child trust fund—I had them all with the same wife, but that is another story. The key point is that there are individuals who have generated savings that would not have been made before the child trust fund came into place. There are people on lower incomes who are saving whatever they can, whenever they can. That money is not lost to society; it is put away for the 18th year, when matriculation takes place.

Claire Perry: I agree with the right hon. Gentleman; we have heard a lot of evidence stating that people do save into the scheme. We can debate statistics relating to how much poor families save, but the point that has not been proved at all is whether additional savings are being made. I have heard no evidence that there is any additionality in the savings numbers, or that such savings would not have otherwise been made. We took evidence from a variety of experienced witnesses, but there are numerous comments on the Netmums website, for example, in which people have asked what was wrong with saving into a bank account. People have commented that they would be saving anyway and that the child trust fund was nice to have, but not essential. Has the right hon. Gentleman seen any evidence that it has generated any additional savings, particularly among the most disadvantaged groups? If so, would he be prepared to put that before the Committee?

David Hanson: I am grateful for the hon. Lady’s comments. I have already said that empirical evidence suggests that savings have risen, in the cohort, from 18 to 31% over the period. There is no definitive evidence as yet as regards the breakdown between the poor and more affluent members of society, but there are certainly poorer people who are saving, who were not saving before. That is an advantage for the scheme as a whole.
At the moment, for example, some £2 billion in assets is under control of the scheme, and £22 million a month in regular contributions is going into child trust fund accounts. We could argue all day about whether that has moved from building societies, from banks or from shares to child trust funds, but everybody who has given evidence to the Committee has said that there has been success in raising the level of savings into child trust funds, and that that has had a material benefit in encouraging people, particularly those on the poorest incomes, to consider saving, when they can afford to, for their children’s future.
On amendment 26, I want to ask about the implementation date of the scheme. It is quite clear from what we heard during the evidence sessions that nobody, including the Minister, expects the replacement scheme to be in place by 4 January 2011. In a press release issued on 26 October 2010—for the sake of accuracy, at 17.55—the Minister stated:
“The Government will now work closely with stakeholders to finalise the structure of the accounts, and intends for the new accounts to be available by autumn 2011.”
One of the key issues on which the Minister needs to reflect is the speed of the abolition of the child trust fund and the replacement product that he is putting in place in 2011. Amendment 26 would not stop the Minister abolishing the child trust fund or eligibility for the child trust fund, nor would it close down the scheme. It would not stop the Minister establishing the new scheme in autumn 2011. It would simply allow him to continue the child trust fund scheme between 3 January 2011 and whatever date he chooses to introduce the new scheme proposed in the press release.

John Hemming: At some stage, it would be nice to clarify the right hon. Gentleman’s figures of 18% and 31%. On the point that I intervened on about delaying the abolition of the scheme, I refer him to column 58 of the Hansard report of the Committee’s proceedings on Tuesday 2 November; sadly, I was unable to attend. Marc Bush, who spoke on behalf of Scope, referred to his concern that people were losing benefits as a consequence of saving money in the child trust fund. Does the right hon. Gentleman agree that that is a bad situation? Is it not sensible to take a break and sort matters out, so that such situations do not occur?

David Hanson: I do not accept that a break would be helpful. If we are trading contents of Committees, I trade with him column 27 of the Committee Hansard from 2 November. In response to my question, Mr Shaw said:
“Therefore the investment in setting up a new product would in effect be like starting from scratch. There is no legacy that you can continue.”
He also said:
“I suspect most of my members would not be ready to provide a junior ISA by early January. The child trust fund itself is a completely different animal to an ISA.”––[Official Report, Savings Account and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 27, Q69.]
The amendment is designed not to tell the Minister not to abolish the fund—although I hope that he does not—but to encourage him to have his alternative in place before the child trust fund is abolished, with the nuts and bolts thought through. It is designed to encourage him to present that alternative with clarity. What is the rush?

Sarah Newton: We also heard considerable evidence that over 100 products are available to parents or grandparents who want a tax-free saving scheme for children. The right hon. Gentleman’s hypothesis that nothing will be available for parents who want to save for the future simply is not true. We heard from the Institute for Public Policy Research this afternoon that the most trusted financial services brand for the over-40s on low incomes is the Post Office. For the under-40s, the most trusted brands are supermarkets. All those organisations have well known tax-free savings products.

David Hanson: I am grateful to the hon. Lady for her comments, but I believe that she misses the point of the child trust fund. There is still a Government contribution, albeit a reduced one, to help kick-start that fund. The scheme will be abolished on 3 January 2010, and no definitive scheme will emerge until perhaps autumn 2010. The Minister has said that those who want to participate in that scheme will be able to backdate contributions accordingly; that is fair enough. I am simply asking: why have that hiatus? Why have that gap?
The Minister could accept the amendment or, if it is flawed or not strictly correct—I have been a Minister and I accept that sometimes amendments do not work out exactly, and parliamentary counsel might need to look at the issue—he could come back on Report with a thoroughly thought-out measure that allows the abolition of child trust fund contributions, eligibility and mechanisms to occur on the date on which the new scheme comes into play. What is the rush? The cost will be relatively minimal because contributions are lower than they were when the Labour Government were in power, due to an order passed earlier this year. Contributions are minimal. On a point of principle, why not let the two schemes run into one?
On Tuesday, Carl Emmerson of the Institute for Fiscal Studies mentioned an “extremely short consultation period.” He said:
“I do not think that it is possible to make decisions on how the policy should look and also ensure that the financial sector is geared up to operate a market of that size.”
That is a quote from him, in the evidence session, in response to the idea of the Minister introducing a new ISA scheme in October or November next year. He also said:
“One option, which was what I thought the Government were going to do back in June, would simply be to abolish the Government contribution to the child trust fund but still allow families to open a child trust fund with tax-free saving tied up to age 18, as they currently do. You would be abolishing the contribution, not the actual accounts.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 16, Q37-38.]
The amendment would give the Minister time to think about that.
What is the justification for abolishing the child trust fund when a parent whose child is born on 4 July next year, for example, could make a donation of £50 of their own? That involves no Government contribution or taxpayer funding, but it does involve a child trust fund account. The mechanism is there because, as the Minister has recognised, those of us who currently have children who qualify for the child trust fund will still have that resource tied up, and the computer system and reference numbers will be in place until those children matriculate at the age of 18.
Why not continue with non-Government contribution to the child trust fund, rather than establish a whole new product to deal with the issue—a product that will not, in my view, help the poorer members of our society to save? A tax-free ISA is not important to them, but the contribution of the child trust fund was.

John Hemming: My reading of the Bill is that children born before 3 July would be entitled to the provision, as long as an application is made within the next three months. Accounts are still going to be opened. However, there is no massive urgency for the replacement. Children will continue to be born, and they can apply retrospectively for a new account. If people are losing benefits as a result of the fund, the previous Government clearly made major mistakes in its implementation.

Sheila Gilmore: I have read the section to which the hon. Gentleman refers—perhaps he was not actually present and did not hear what was said. Mr Bush stated:
“child trust funds, particularly for disabled children, work so well because there are no alternative savings products that work for families with disabled children, mainly because of the penalties that are inbuilt within the benefits system.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 58, Q161.]
He then went on to say that people were afraid—wrongly, I think—that some officials misinterpreted the child trust funds as affecting benefits. Is not the solution to ensure, perhaps with a minor amendment, that for disabled children, child trust funds would not interfere with benefits? It may well be that they do not, and that that was only a fear. Mr Bush’s evidence suggested that child trust funds were actually the best form of investment.

Sarah Newton: Will the right hon. Gentleman give way?

George Howarth: Order. Before the hon. Lady intervenes, I should say that, in the short time we have been meeting, I have noticed that interventions have been getting longer and longer. There is nothing wrong with interventions. It is a good way of debating these matters, but members of the Committee should be aware that interventions should comprise a single point and a single question.

Sarah Newton: Thank you for that reminder, Mr Howarth. Does the right hon. Gentleman also recall that the IFS said that by far and away the most tax-effective way for parents to save would be with ISAs?

David Hanson: That is all very well for those parents who pay tax. Not every parent pays tax. The hon. Lady needs to reflect on the fact that the child trust fund was a universal benefit whereby a sum of money, admittedly now lower, would be paid in to help kick-start the investment.

Yvonne Fovargue: On Tuesday, Anne Longfield said that the language of ISAs is confusing, does not relate to the experience of most low-income families and should be kept as simple as possible, which the child trust fund is.

David Hanson: Indeed. I accept what my hon. Friend says. The key point, and this is genuinely trying to be helpful to the Minister as I am not one to cause him grief—

Mark Hoban: The right hon. Gentleman certainly has not so far.

David Hanson: Well, it is not for me to cause him grief, but for the people who lose the benefit in due course and who will react against the policy. What is wrong with just making sure that we continue to run the existing child trust fund mechanism beyond 3 January 2011, and he can then, by order, end that scheme on a date when the scheme that he is bringing forward is in place? I cannot see the difficulty there. The Minister may be able to help me again today. In his press release of 22 October he said:
“Annual contributions will be capped”.
Has he made a decision on what that cap will be yet? He has not responded and I will certainly give way to him if he has made a decision on that.

Mark Hoban: I know that the previous Government had their own way of making policy, but we are consulting and it would be wrong to pre-empt that consultation by deciding what the cap is now. I am sure that the right hon. Gentleman would agree that good policy making is based on consultation. I may be diverging from past practice but we want to consult with providers and stakeholders about the level of the cap.

David Hanson: Perhaps the Minister could tell me exactly how much consultation he had on the abolition of the child trust fund because I do not think there was a great deal of consultation on that. Today is 4 November. Clause 1 abolishes the child trust fund contributions eligibility from 3 January 2011 without the Minister yet being able to tell us what will replace it in any shape or form. I refer again to Mr Shaw who said:
“An ISA is run on an annual renewal basis, whereas a child trust fund is run as a trust for the child over a much longer period.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 27, Q69.]
There are differences in the product. The Minister will not confirm, because he is still consulting, what product will replace the child trust fund while asking the Committee to abolish the child trust fund under clause 1. Amendment 26, whatever its technical faults and the political principle behind it, simply says that if the Minister is going to abolish it, he should do so from the date when the new scheme comes into operation. That would avoid all the confusion of two schemes being run at once and people not knowing what the final scheme is. It avoids the problem of backdating contributions from the commencement of the new scheme to 3 January 2011. I cannot understand why the Minister will not reflect on that. I am throwing him a ball to help him achieve his objective of abolishing the child trust fund, even though we oppose that abolition.

Kate Green: It is interesting that Tony Vine-Lott told us on Tuesday that one of the features that had been attractive to providers who had significantly entered the child trust fund market was the Government contribution. Is it not the case, therefore, that the Minister ought to be clear about how providers would respond to a product that might or might not have a Government contribution? Until that is known, he cannot proclaim the likely commercial success of the junior ISA.

David Hanson: My hon. Friend makes a valuable point. I will provide the Minister with some statistics behind the figures. Currently, about 70,000 children are born every month. If the scheme is abolished on 3 January 2011, it means that in January, February, March, April, May, June, July, August, September, possibly even October and November, approximately 70,000 children will be born each month who are not eligible for the child trust fund. They will have to learn from their parents, retrospectively, about the new product, even though their parents may have different levels of educational attainment and different information sources. They will have to learn from the Government, retrospectively, about how they then put money into the fund under the Minister’s new ISA proposals. They may have not realised that they can put money aside before those periods of time. I contend that as many as 500,000 children could be disadvantaged, because they will not have been in the child trust fund and they will not necessarily have taken up the child ISA, because we do not yet know what the child ISA is.
The amendment simply gives the Minister a chance to say, “On 1 October, this contribution”—much as I do not want it to happen—“will end, and the new scheme will come into place on 1 October.” I will even give him a commitment that I will not oppose the regulation’s passage through the House next June or July, so that he can agree to the date of 1 October and end the hiatus. What is the problem with that? I am compromising dramatically my beliefs and those of my hon. Friends in offering the Minister that opportunity, because it will ensure that children born from 3 January through to whatever date he issues his ISA will have a child trust fund contribution of £50. They will be able to establish that and maintain the continuity that, sadly, the Minister wishes to throw up in the air and lose. I cannot see the argument against that.

John Hemming: May I put an argument against that?

David Hanson: How can I resist?

John Hemming: If a person has an account of £500, it earns £7.50 at an annual rate of 1.5%. If they have only £50, it is 75p, which most providers would run at a loss, and I am not sure that providers would financially be able to cope with that.

David Hanson: I hate to disillusion the hon. Gentleman, but most providers are losing potential future clients now. They will find great difficulty in maintaining the existing infrastructure for the child trust fund from now to commencement. When we get to the clause stand part debate, I want the Minister to talk about how the abolition of the fund will impact on the current providers of child trust funds. They provided the fund in good faith, in line with Government policy. The Minister has given a commitment to maintain the child trust fund for people who paid into it, so that they can matriculate at the age of 18.

Stephen Williams: The right hon. Gentleman may recall the evidence session with Tony Vine-Lott from the Tax Incentivised Savings Association. I asked him to confirm that, for the remainder of the child trust fund’s life—because, of course, the existing funds have not been abolished—they would still be charging annual fees. Although none of the witnesses said yes, they all nodded.

David Hanson: There has to be an element of financing for the operation of the scheme. That is understood. That has to be the case. By my estimates—I may be a few hundred thousand pounds out either side—we are talking about a possible cost of around £31.5 million until October, plus the costs of maintaining the existing child trust fund. In deficit reduction terms, that is not a great deal of money. It would ensure that the hiatus did not happen and the Minister could introduce his scheme at the right time without damaging the child trust fund from 3 January. It would ensure that another 500,000 children had some contribution towards their child trust fund, and that many people, as mentioned by the hon. Member for Truro and Falmouth, could contribute to the fund over that period of time. I hope that the Minister will reflect on that.
Amendment 1 states that we should leave out 3 January 2011 and insert 3 January 2014. Again, the Minister will know, because Government Members have indicated it, that the next general election will be in 2015. It is quite possible for him, therefore, to accept the amendment; to examine the continuance of the child trust fund with lower contributions of around £31 million or £32 million a year—£50 for each person; to encourage that savings culture over the next three years, and to consider how the economy develops in that period.
The Minister wants—and believes that they will—the general deficit reduction measures, employment measures and reductions in public spending to benefit the economy as a whole. We think that those measures might cause 500,000 jobs to be lost in the public and private sectors, but he presumably believes that the economy will get better because of the medicine that the Government are giving it over the next three years.
Why is the Minister punishing future generations of children by abolishing the scheme in that three-year period when he could allow a much lower contribution? The amendment gives him the opportunity to abolish the higher rate and would allow for a contribution rate over the next three years of £50 per child for the 70,000 children who are born each month. That would save a considerable amount of public resource, which is important, as the hon. Members for Congleton, for West Worcestershire, and for Devizes mentioned. He would save a considerable resource without abolishing the scheme. If, therefore, the economy picked up, he could either maintain the scheme beyond 2014, or consider returning to a higher rate of contribution to help alleviate poverty, and help asset-poor individuals at the age of 18. The scheme could be maintained for a three-year period.
I accept that the proposal involves a cost of £31.5 million to £32 million a year. However, over the three-year period, that might be £100 million or £120 million, rather than the £500 million that the Minister is considering saving. It would help him to save—I am throwing this ball to him, so I hope that he picks it up and runs with it—a considerable amount of public resource, but still give him the flexibility to ensure that we have the benefits of the savings culture about which we heard in the evidence sessions. It would ensure that the mechanism and infrastructure are still in place so that we can continue to contribute. If the economy picks up—and we will fight an election on that in four years’ time—

Mark Hoban: Five years.

David Hanson: Four and a half now. If it picks up, the Minister can reflect on the abolition of the child trust fund. If he does not accept the amendment, I will presume—and far be it from me to presume, because the Minister can speak for himself—that he is against the fund on the basis of dogma, not of deficit. He is against the fund because it is a Government contribution to help partnership with parents to secure assets for people who are asset poor at the age of 18 and will remain so unless he does something about it. If it is not dogma, he can save a large amount of public money by accepting the lower rate, running it for three years until 2014, and maintaining the infrastructure of the scheme.
If the Minister did that, he would not have to start his new ISA. He could stop developing that, stop the hiatus with the new product, and maintain the existing child trust fund at a lower rate of contribution. The Government would not have to go through the mechanisms of Treasury officials developing a new ISA, talking to the market, throwing all the cards in the air and seeing how they land. He could maintain the current product for a much lower rate without abolishing the trust fund.
I have moved a long way on that, from opposing the reduction of the £250 contribution in July to saying to the Minister, “Here is an offer from the Opposition—have the £50 rate, maintain the scheme, run it for three years, see how the economy picks up and, at the end of the three years, if the economy is still going belly up, abolish it.”

Fiona Bruce: Would a £50 contribution not produce the worst of all worlds for young people? The Labour party has said that the one benefit for young people whose families do not engage with the scheme is that they at least have a nest egg at age 18. That contribution would not provide that.

David Hanson: If the hon. Lady votes for clause 1, there will be no nest egg at the age of 18 for contributions to be paid into; there will be a nest egg only for those people who can afford to put money into a tax-free ISA. Fifty pounds is not perfect—I do not want £50, and it is not what the Labour Government did—but it is £50 more than the hon. Lady will be voting for if she supports the clause in due course.

Kate Green: Is it not also the case that, by keeping in place a mechanism that allows for Government contributions, we could reactivate the mechanism to make a second payment at age seven? After the economy recovers, we might have the opportunity to resume the previous scheme.

David Hanson: Indeed. By amending it to 2014, I am giving the Government an opportunity to reflect on the fact that they do not have to abolish the scheme to save money. The Minister could take a payment holiday for that three-year period. I do not necessarily think that that is a great idea, but he could do that. He could maintain the structure of the child trust fund and wait to see how the economy develops. What is wrong with that? What is the problem with taking a payment holiday and having a reduced figure while maintaining the structure of the child trust fund? Or does the Minister not believe in the concept of a child trust fund? If that is the case, he should tell us so. If the Bill is about deficit reduction, I am offering him £350 million to £400 million of deficit reduction by maintaining the scheme for the next three years.

Kerry McCarthy: Is it not also the case that, if the child trust fund’s structure were maintained, as the economy recovers, and as the deficit is reduced, Government contributions could be phased in so that priority could be given to disabled or looked-after children? The Government could then move on to making payments across the board.

David Hanson: My hon. Friend makes a valuable point. I do not want to discuss it now, but we will table amendments concerning looked-after and disabled children. We will also table amendments concerning the poorest children in society.
I remind the Minister, because we will be moving on to it in a moment, that the Conservative manifesto, on which eight members of this Committee stood, stated that they would maintain child trust fund payments to those in receipt of disability living allowance and maintain payments for the poorest third of society. The Minister could take a three-year payment holiday in payments to those groups, then look at the economy, and still go back to the electorate in 2015 and say that he had maintained payments to the poorest third and to those in receipt of disability living allowance. He would have to admit that he took a payment holiday, because he had difficulties with finances, but he could say that he had restored the payments. If the mechanism is not in place, the Minister will not be able to do that, because he would have put in place a totally different product with a hiatus in between in which he would have reneged on his manifesto commitments. He would not have achieved what hon. Members—and they are honourable Members—wish to do to meet the manifesto commitments that got them into Government.

Stephen Williams: The right hon. Gentleman seems to be going back to points that he raised earlier in our considerations. He raised them on Second Reading, too. Perhaps the Labour party’s preferred alternative is now to focus this fund on poor and disadvantaged children, or children with special educational needs and disabilities. Does he acknowledge that by the next general election £2.5 billion a year will be spent on precisely those groups in the form of the pupil premium?

David Hanson: I think that I would be in danger of being called out of order if I were to stray on to the pupil premium. There is a major debate about that, and my hon. Friend the Member for West Ham feels particularly strongly about how it would affect her constituency.
I remind the hon. Gentleman that he has a clear position of integrity, and he is supported by his electorate. He opposes the child trust fund and he said that he did in Bristol West. The hon. Member for Birmingham, Yardley also went to his constituency and said that he opposed it. They are fulfilling their obligation in this Committee. I say to every other member of the Committee, however, that they will not fulfil their manifesto obligations. Potentially, if I am honest, we are not now going to meet our obligations either, because we might even give ground to save—[Hon. Members: “Ah!”] We are giving ground to salvage the potential for the child trust fund.
The first thing that I said to this Committee is that we will oppose clause 1, because we think that it is wrong. However, I am giving the Minister the opportunity to keep the child trust fund in place by looking either at a payment holiday, or at alternatives to the child trust fund over that period of time.

Sheila Gilmore: I appreciate that the alternative uses of the money might be outwith the scope of the Committee, but will my right hon. Friend reflect on the fact that that there is a real loss for children in Scotland, who will not be getting the pupil premium?

David Hanson: Not only poor children in Scotland. The pupil premium is an England-only scheme. My constituency is in north Wales and the pupil premium will not apply there. If my hon. Friend the Member for South Down was here, she would say that the pupil premium will not apply in Northern Ireland. The hon. Member for Bristol West might want to speak for England, but we happen to speak for the United Kingdom.
While I am on the topic—amendments have been tabled related to the devolved Administrations—the Welsh Assembly Government tops up the child trust fund with contributions. The proposal is to scrap the scheme on 3 January. The six to seven months for which amendment 26 would provide would allow further discussions to be held with the Welsh Assembly Government on their contributions to the current child trust fund. Indeed, a longer gap between now and 2014 could achieve the same thing.
I again quote Anne Longfield, the chief executive of 4Children, from the evidence session on Tuesday. She said:
“I think that we do have a structure here. There has been a massive investment in getting the information of to parents, and it is becoming very well known. For very little money that could be maintained and built upon. If we change the system, we would have to not only reinvest in a completely new mechanism, but start to get that information out to others…there is much to be said for building upon what is already there and what already works.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 58, Q161.]
All I am doing is giving the Minister the opportunity to do that.

John Hemming: Does the right hon. Gentleman agree that it would be entirely possible, after consultation, to reinstate the system that currently exists, without the payment and without any break in entitlement? People would merely have to apply a little later.

David Hanson: I am trying to make my points. I believe that the Minister has an opportunity to reflect on the amendments and not to abandon his principle regarding the abolition of the child trust fund. Under amendment 26, he would abandon that principle for the next eight months until he has a replacement or, under amendment 1, he would abandon that principle until 2014, at relatively low cost, and then see whether the economy picks up. Both approaches would maintain the child trust fund infrastructure and both would represent an opportunity at least to avoid the disturbance that we have today.
We are in danger of throwing the baby out with the bathwater. We have an incredibly successful scheme in which millions of families are saving that could be maintained at a relatively low cost. Indeed, hon. Members should not listen only to me. We have received evidence in the past 24 hours from Save Child Savings, which comprises the Daycare Trust, the director of ResPublica, the IPPR, the London School of Economics, the Young Women's Christian Association, the National Childbirth Trust, the Children’s Mutual, the chief executive of the Family and Parenting Institute, Scope and others. In its written evidence to the Committee today, it states:
“The savings black hole of six months or more…would result”—
in—
“an unnecessary hiatus — certain to damage consumers, the industry and the UK’s already struggling savings culture”.
Rather than read all this into the record—it is already on record—Members can look at the correspondence from Save Child Savings. However, paragraph 2.1 states:
“Our request is simple — for legislative provision to be made for the core CTF infrastructure of the tax-fee wrapper to continue to run, without state contribution”—
to ensure that—
“until the Government has finalised, legislated for and introduced its plans for a replacement savings product during 2011”—
the allowance infrastructure continues. I cannot understand why the Government do not accept that request.
Amendment 10 proposes that we should replace the 2011 date with 2016. I have touched upon that already, but it is important that the Minister responds to the amendment. I tabled it because it would help Conservative Members to return to their electorates in 2015 having fulfilled their general election manifesto commitments. I would not want the Minister to return to Fareham, or the hon. Member for Scarborough and Whitby to return to his constituency, and say, “Not only have we not fulfilled our manifesto commitment, but we have done the exact opposite of what we said we would do.”
The Conservative party manifesto for the general election on 6 May said that the party would
“cut government contributions to Child Trust Funds”,
as the Government did in July. The manifesto, however, had the important caveat—the Prime Minister held it in great esteem during his election campaign—that the contributions would be cut
“for all but the poorest third of families and families with disabled children”.
The Committee will be given the opportunity to accept that principle later in our deliberations, but I am trying to ensure that the Minister and his esteemed colleagues, for whom I have the greatest respect, look at the issue and undertake to postpone the decision on the complete abolition of the scheme until 2016. If they accept amendments 26 or 10, they will be able to bring into effect a scheme that allows the poorest third of families and families with disabled children to maintain a child trust fund at a future date. The Minister would also be able to introduce a tax-free ISA scheme for people who are not in those particular groups at that time.

Stephen Williams: When the right hon. Gentleman was a Minister, he was used to a system in which his party had an absolute majority and could do whatever it liked. It did not, however, always honour its manifesto commitments. Does he accept that this is a coalition Government and that the coalition agreement therefore supersedes the manifestos of both parties? If the negotiations between my party and his had succeeded and a different coalition was in place, would he have thought it reasonable if a Conservative shadow Minister, which is what my hon. Friend the Minister would have been, had put the same point to him?

David Hanson: There are many members of this Committee, yet only two went into the election committed to the abolition of the child trust fund. None of the Conservative or Labour members did that. It is a strange democracy indeed in which two members of a Committee ensure that the other 16 members have to do their bidding.
Once upon a time, when I was leader of my local authority, we had 27 Labour members, 25 Conservative members and three Liberal Democrats. Every time we had a discussion, we had to look to the three Liberal Democrats to determine what the local authority’s final policy would be. One Liberal Democrat always wanted to vote with the Tories, another wanted to vote with us, and the other could not make up their mind. I pay tribute to the two Liberal Democrat members of the Committee, because their position is totally consistent, but I disagree with them. The Liberal Democrats returned fewer Members at this election than they had in the previous Parliament. However, they have the opportunity to tell the Conservative members of the Committee to ditch their manifesto commitment and to tell the Labour members not to support the scheme that we introduced.

Claire Perry: In the real world, when facts change, policies can change, too. The incontrovertible fact is that when we came into power as a coalition Government, we were left a helpful note by the former Chief Secretary, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne)—[ Interruption. ] Labour members of the Committee may all groan, but the fact is that there is no money. We are prepared to change our policies to deal with the new reality of the world, and I am surprised that the right hon. Member for Delyn is unable to do the same.

David Hanson: If the hon. Lady is concerned that there is no money, perhaps she will tell me why she has not argued for raising the bank levy from £2.5 billion to £3.5 billion and thus getting an extra £1 billion. The continuation of the child trust fund will cost about £130 million. If the hon. Lady is saying that we should not put women and children first on the Titanic of our financial situation, so be it, but I do not believe that that should happen. The key point is that the amendments would allow us to keep the child trust funds so that the Government could honour the pledge in the Conservative party manifesto over the course of this Parliament.

Sarah Newton: To save more of the right hon. Gentleman’s crocodile tears on my behalf, may I say to him that I am very confident about facing the people who sent me to represent them in Westminster and defending my record in five years’ time?

David Hanson: I wish the hon. Lady every success. I am sure that she will do fine and that she will be able to have a coalition with the Liberal Democrat who was, I think, about 435 votes behind her. We will see which of them will be the next Member of Parliament for the constituency and so from which half of the coalition that Member will come. Indeed, there might be only one candidate, and she may be it. Perhaps she will be carried through the streets of Truro and Falmouth, and acclaimed by the Liberal Democrats who opposed her so fiercely only a few months ago.

George Howarth: Order. I think that fun time is over.

David Hanson: I simply say to the hon. Lady that manifesto commitments are important. The Liberal Democrats have made theirs, as have the hon. Lady and others, and we have made ours.
I simply commend amendments 26, 1 and 10 to the Committee in the hope that I will allow enough time for the Minister—and, if they wish, my hon. Friends—to contribute to this important debate. I am simply putting on record that it does not need be like this—there is an alternative. The Minister has it in his power to accept any of the amendments, and therefore reflect the will of what we heard in the oral evidence sessions and—in due course, I hope—that of the majority of the Committee. I look forward to the Minister’s contribution.

John Hemming: I am pleased to serve under your chairmanship, Mr Howarth. I reiterate my declaration of interest: I chair a company I founded many years ago that provides software for financial services providers, including those who provide ISAs.
I was attracted by the idea put forward by Save Child Savings and others of just keeping the infrastructure going. In practice, however, we already know that we will not stop opening accounts on 3 January, because accounts will be opened over the next three months. Clearly, the issue to be resolved is the practicality of how to handle children’s savings without the £500 or £250 from the Government, which makes a difference to running those accounts.
The Government are entirely right to have a consultation process, because nobody will lose out from having a period of consideration before the new system is brought in. That new system might be the same as the old one, in the sense of the infrastructure and the computer systems, or there might even be two different alternatives, with one feeding into the ISA mechanisms and the other into the child trust fund mechanisms. The reality is that the investment for putting in place all the computer systems has already been made by organisations such as the Children’s Mutual, which should be recognised. The Revenue has its links to such systems, as it does to those of the ISA providers. All that is in place, so there is no problem in switching it back on to allow people to open accounts.
One good thing about the route of the child trust fund is that people are given a chitty—a piece of paper with which they can open an account. Therefore, there are none of the money-laundering problems that arise with opening other accounts. It is an easy process, but there is absolutely nothing that means that everything has to be kept going. The current system opens up a default account, without any money. A lot of accounts will have to be managed without money in them, and there will also be a requirement to send a document on children’s birthdays to say that they have no money. That is not a good use of funds whoever is paying for them—whether a private provider or the Government.
Much as I was persuaded by the people citing evidence that it would be a good idea just to keep the process going as it is, having thought about it at more length and remembering that this is one of the things in which I have been involved for many years, it is far better to have a period of consideration during which we work out whether to use the infrastructure without the default opening of a bank account, because that is a bit silly. We cannot just continue the process as it is, because that would just cause a massive problem without any funds from the Government. Do we have both options, one based on the ISA and one based on the infrastructure of child trust funds? The amendments set out the idea that we should just keep things ticking over.

Sheila Gilmore: The hon. Gentleman seems to be suggesting that a period of reflection is necessary to decide which mechanism to use. On that basis, is he suggesting that we should, in fact, accept amendment 26, which would not abolish the entire child trust fund mechanism in January, but would allow it to continue until such time as that period of reflection has gone through and the Minister can put in an order?

John Hemming: Within the current law, if lots of empty accounts are opened when pieces of paper have to be sent out each year, there are costs of maintaining the computer systems, the database, postage and so on. It might be very good for the Royal Mail to have lots of pieces of paper floating around the country saying, “You’ve got no money”, but someone has to pay for it. Whoever has to pay for it has a difficulty that comes out of the infrastructure, which is supposed to benefit children, but will not.
We need to put a halt to opening new accounts. To the extent that there is a process of consultation that identifies the best way forward, I will not support the amendments. There might be a very good argument that such a system is the right infrastructure as long as we do not have the empty accounts, but we must stop opening up accounts with no money in them.

Mark Hoban: It is a pleasure to serve under your chairmanship, Mr Howarth. I will not be quite as lengthy in my remarks as the right hon. Member for Delyn. We might want to leave some issues to a stand part debate, although I am not quite sure what they are after his speech. Let me address the three sub-groups of amendments. The right hon. Gentleman says that he is pragmatic. He first produces a menu of choices for the Committee. I am not sure which one of the three choices he put before us he himself favours. We may see if he presses the amendments to a Division.

Lyn Brown: It is fairly obvious.

Mark Hoban: The hon. Lady says that it is fairly obvious. I am not sure that it was fairly obvious from the 50-minute speech that we heard.

David Hanson: Will the Minister give way?

Mark Hoban: No. The right hon. Gentleman spoke for so long that we just want to move on to discuss the amendments in substance and deal with some of the issues that have been raised.

Yvonne Fovargue: Will the Minister give way?

Mark Hoban: If I can start off by dealing with the amendments, I might resolve the hon. Lady’s concern. Let me deal with the first ball that the right hon. Gentleman threw me, amendment 26. It is one of the three pragmatic options and suggests that we defer the date for implementation until the final details of a replacement of the junior ISA are pinned down. My hon. Friend the Member for Birmingham, Yardley made a good point about the cost of simply keeping open, re-opening and opening accounts. We need to draw a line on such matters. It is the case that we have had initial discussions with providers. We issued a further consultation document on the day of Second Reading, but I wish to clarify some issues that have been raised.
The hon. Member for Stretford and Urmston, who is not in Committee, asked whether providers would be interested in a junior ISA. It was clear from those to whom I spoke when meeting stakeholders in July this year that they were indeed interested in providing that. In terms of the appetite that there is in the savings industry, it is clear that people are interested in providing the product. The hon. Member for Makerfield, in an intervention in the speech of the right hon. Member for Delyn, suggested that people on low incomes do not understand ISAs. She might be interested to know that 12 million people with incomes of less than £20,000 a year have ISAs. It is clear that the ISA is a product. It is a well-recognised brand. People understand exactly what it does and those on low incomes are prepared to save.

Yvonne Fovargue: The Minister might be aware of the evidence from Anne Longfield, which I believe he was not in his place for, when she stated, as the chief executive of 4Children, that ISAs were confusing to low-income families. That was not my point; that was the point from Anne Longfield, who stated that there was no need to produce another savings product, and that ISAs were confusing and had no benefit to low-income families.

Mark Hoban: I cite as evidence—we like to have evidence in these Committees—12 million people on low incomes who do not find ISAs confusing, are quite happy to take them out and who understand them. They are a well-established brand. One in five people on low incomes have ISAs. That is a significant take-up and people do seem to understand them. For families there is a choice: there is a cash ISA and there is an equity ISA. The cash ISA is something that people will understand.

Kerry McCarthy: The Minister has just said that one in five people on low incomes have ISAs. Does he have any breakdown of whether they are older people, people with young children, or families and so on? Is there any analysis about the kind of person on a lower income who sets up an ISA account?

Mark Hoban: I do not have that information to hand, but I suspect that a whole range of people on lower incomes have ISAs, whether they are families or older people. As was said earlier in the evidence session, credit unions will say that people on low incomes are able to put money aside in accounts. I think that people understand the merits of saving. It is not appropriate to argue that that is a socially exclusive product. It is not. It is a very popular vehicle for saving money.

Yvonne Fovargue: Will the Minister give way?

Mark Hoban: If the hon. Lady would pause just for a moment, I appreciate that that may be difficult to swallow, but people on low incomes do understand ISAs very well.

Yvonne Fovargue: Will the Minister tell me which credit unions provide ISAs? I believe that they are precluded from providing ISAs under their rules at the moment.

Mark Hoban: If the hon. Lady looks back at the record she will see that I did not say ISAs. I said that people with credit union accounts are able to save money and do save money for their future.
The right hon. Member for Delyn quoted Carl Emmerson’s evidence to the Committee, who said that there is an extremely short consultation period. Of course, he then went on to say that one response, once we get to the stage of introducing these junior ISAs, would be to backdate them. We accept that and think it is right to take that point on board.

David Hanson: Will the Minister clarify how, where, when and under what mechanism he will ensure that individuals know about that backdating? If my child was born on 4 January 2011, and it is a contribution from the parent, how will I know that the scheme is in place? What is the mechanism, what is the cost and how is he going to do it?

Mark Hoban: There is a range of mechanisms that we can use to ensure that people are aware of them. If there are a large number of providers interested in providing the accounts, they will market them—they will advertise them. We do not have to go very far through a newspaper’s money supplements on a Saturday or Sunday to find great adverts for ISAs. That shows to me that people who want to promote them will advertise them or make them known. There are other mechanisms we can use, perhaps through the Consumer Financial Education Body and the work that it does with expectant mothers, to remind them about the opportunity to open children’s ISAs, so there is not a shortage of ways to make this known to individuals. I do not believe that there will be a hiatus. There will be the opportunity to continue promoting saving among young people.

Kerry McCarthy: Will the Minister give way?

Mark Hoban: I just want to make progress on the concept of amendment 26 and putting off the end date for CTFs. The consequence of that is to continue the lower rate of contribution that we agreed in this place in July, in discussions with CTF providers. My hon. Friend the Member for Birmingham, Yardley touched on that. He commented on the return that people would get for opening a £50 account. I think he said something about 75p.

John Hemming: One and a half per cent.

Mark Hoban: Yes. Of course, CTF charges are capped. With a £50 contribution, it would not be economically viable for many providers to continue to offer CTFs. All three batches of amendments that the right hon. Gentleman tabled would make the accounts economically unviable for providers. I therefore think that we are taking a reasonable step.

John Hemming: I am concerned about people on lower incomes. In the consultation process, will the Minister look as hard as he can to find a mechanism to ensure that one does not need a minimum amount of money to open an account?

Mark Hoban: My hon. Friend makes an important point. That is something we need to think about when designing the scheme. I am clear that it should be as socially inclusive as possible. We must take into account families on low incomes that might not be able to put away a huge amount.
I do not think that the arguments for deferring the end of the child trust fund are robust. I do not believe that the first batch of amendments is sensible. We need to make progress in saving taxpayers’ money because we inherited a huge deficit.
That brings me to the next batch of amendments, the first of which is amendment 1. These amendments encapsulate Labour party policy, which is, “Let’s just put it off. Let’s just wait for another day. Let’s just wait and see what turns up.” That is a Micawberish approach to economic policy. We recognise that we need to make progress now. That is why we started to reduce the contributions with the statutory instrument in July. The Bill completes that process. This is the right thing to do. We do not want to put off tackling the deficit because, as the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) said, the cost of doing so would be borne by the poorest in society. We need to make progress now. There has been no suggestion from the Opposition about what the alternative might be. If we prolonged the process, the money would have to be found from somewhere—perhaps through a reduction in the pupil premium, through increased borrowing or through increased taxation. I will not dwell on that.
This decision must be confronted. My hon. Friends in the coalition are very supportive of taking difficult measures now. I therefore do not think that deferring this measure until 2014 would be helpful. That proposal suffers from the same defect as the last: that for the next three years, CTF providers would find it economically unviable to service accounts. It would be wrong for those providers. The third batch of amendments, the first of which is amendment 10, compounds that argument. We need to take tough action to tackle the deficit.
In his wide-ranging opening speech, the right hon. Member for Delyn forgot to mention amendment 19. The Committee ought to consider it. He is an experienced Member of this House and, as he acknowledged earlier, he used to be a Minister. If the Committee passed amendment 19, it would require something that is medically impossible: it would require babies to be born twice. The Bill would state that a child has to be born “before 3rd January 2011” and “after 3 January 2012”. The purpose of the amendment is not clear to me. I will try to be helpful and pass him the ball, as it were, to rescue him from this problem. I think that he might be trying to realise the suggestion of the hon. Members for Stretford and Urmston, for Makerfield and for Bristol East—his fellow shadow Minister—of having a payment holiday, rather than deferring the end date for the CTF. I think that is why the amendment suggests a year’s gap in payments, but perhaps the right hon. Gentleman would like to clarify its purpose.

David Hanson: If the hon. Gentleman can tell me that every amendment he ever tabled in opposition was perfectly correct then I will take my hat off to him and say well done. I have half a researcher dealing with these issues; the hon. Gentleman has the whole Treasury. The purpose of that amendment was to delay the abolition for a further 12 months, which could have allowed the Minister to have a payments holiday. If it is technically incorrect, the principle is still there. We still think that we should not abolish the scheme and there is a range of options in front of him which he appears to be rejecting.

Mark Hoban: So we have a fourth option. Either we implement the end of this by statutory instrument or by January 2012, or January 2014 or January 2016. That is a veritable smorgasbord of options and we will be able to make our decisions.

David Hanson: Let me remind the Minister that my first option is to vote against clause 1, which we believe is the wrong choice. But I am trying to be pragmatic to ensure that we at least give him the chance to reflect on the damage he will do and to look at how we could mitigate that. I will make him an offer. I will withdraw any or all of these amendments if he will look at them, take them to the Treasury officials, work on them and bring back the principle of any or all of them on Report.

Mark Hoban: The problem is not so much the drafting of the amendments—there is work that we can do to tidy them up, particularly amendment 19—but the principle behind them. We need to tackle the Budget deficit. We are not doing this from dogma. As he will recollect from the excerpt from Hansard that he read out and our lengthy debate on the programme motion on Tuesday, my right hon. Friend the Prime Minister referred to the fact that he and my right hon. Friend the Chancellor served on the Committee that introduced the child trust fund. We are not doing this because we feel there is an ideological need to scrap child trust funds. We are doing it because we need to sort out the mess that we have been left by our predecessors. That is what is driving this Bill—

Sheila Gilmore: Will the Minister give way?

Mark Hoban: Let me finish my point. We are trying to tackle those problems and reduce the level of borrowing in this country so that we can keep taxes and interest rates low. That is in the interests of everyone, particularly the poorest in society who are more vulnerable to the ebbs and flows of the economic tide. I will happily give way to the hon. Lady.

Sheila Gilmore: I am still unclear whether the Minister opposes the principle of child trust funds or it is simply because of the financial situation that he wants to abolish them. Some of his hon. Friends indicated in the evidence-taking sittings that ideally they would wish to keep them. On that basis would it not be better to keep the mechanism in place so that when and if the economy recovers in the way that he clearly expects it will, it will be possible to restore this provision, which, apparently, his party considers to be a good thing?

Mark Hoban: This is the problem. It is all very well to say that we should keep it going for a while but it means that we will have to force providers to open accounts that will not be economic. It means that we will have to keep the system going in HMRC. We have a much better alternative, which is cheaper for the taxpayer, and reflects some of the design features of the CTF that we approve of such as locking up savings until someone is 18 and allowing a range of people to contribute to that product. Those are important matters. It would cost probably about £2 million a year simply to keep the CTF ticking over. I can think of much better ways to spend £2 million in HMRC, such as trying to tackle tax evasion and things like that. I am sure that the hon. Lady would agree with me on that point.

John Hemming: Obviously, the Government will keep the accounts that exist at the moment, so a certain amount of the infrastructure will be there. Does the Minister not agree that, whereas it would be fair to criticise me for being dogmatic about abolishing the child trust fund, it would be very unfair to criticise him, as it was in his manifesto and agreement was reached in the coalition negotiations to get rid of it?

Mark Hoban: My hon. Friend is being quite kind to me. It is a pragmatic decision that we had to reach given the scale of the challenges that we face. When the Child Trust Funds Bill was debated in the 2001-05 Parliament, his hon. Friends were very principled. They voted against it and they had a view about where that money would be better spent. We are making that decision now. We are recognising that, given the financial situation that we inherited, better ways exist of spending that money, and that it is better to try to tackle the deficit than simply to lock up money until children are 18. It is better to be able to spend the money in ways that will help families now than to wait until their children are 18. That is the challenge that we must acknowledge.

Fiona Bruce: Dr Callan said during the evidence sessions that the scheme disproportionately favours the middle class. If we are making judgments about priorities, we need to consider how we can most benefit those who are most in need and vulnerable. The fund does not do that.

Mark Hoban: My hon. Friend makes an important point. Returning to the evidence, in 2008-09, 13% of low-income families contributed to a child trust fund, and 30% of better-off families did so. The average contribution of £23 was across all child trust funds held by low-income families, but only 13% of those accounts received any additional contributions. We must take on board the point that my hon. Friend the Member for Birmingham, Yardley has made that there are better ways to spend the money, which will tackle inequality and disadvantage among young people.

David Hanson: My intervention may be helpful to the hon. Member for Congleton. Perhaps she will consider voting for the next set of amendments, which restricts the child trust fund to the poorest third of society, as per the manifesto on which she stood. If we abolish and do not accept the regulations through the amendments that we are considering, we will not be able to look at those later amendments in the same light. I hope that the Minister will consider how he can target the benefit towards the poorest third of society, which is what the hon. Lady has just indicated that she supports.

Mark Hoban: I would love to discuss amendments 20, 21 and 22, and perhaps we can move on to them shortly. We still have some time, and it would be good to cover those amendments. I will make my arguments against them at that point.
We need to find ways of helping the disadvantaged. The question is whether it is better in current circumstances to perpetuate the child trust fund or to find a different way of helping the disadvantaged. That is why we stick to the principle of the Bill, which is to scrap the scheme on 3 January 2011. It is not an easy decision for the coalition Government to make, but it is the right decision to tackle the problems that we have. If the right hon. Member for Delyn chooses to press his amendments, I would encourage my hon. Friends to oppose them.

Sheila Gilmore: There is an incoherence in what is being said. On the one hand, the purpose is said to be saving money and paying down the deficit quickly, relying on the fact that that will turn the economy around. On the other hand, there is the question of whether this is a good mechanism for helping poorer families, for asset transfer, and for helping young people to make decisions in their lives at important times.
Either it is a good policy or it is not, and I am hearing very mixed messages. At times, the message is that it would be a good thing to do if we could afford it, but that we cannot afford it at present. At other times the scheme is criticised because it locks money away and makes it unavailable, and it would be better for poorer people if money were available. That would make sense if the Bill stopped the child trust fund and gave an equivalent sum of money to such families now, but that is not the choice before us. The choice before us is to abolish the child trust fund, with effect from January, without putting anything similar in its place. The money will not be spent on poorer families, because the only alternative that is suggested—it is not in the Bill at all, but we have devoted a great deal of time to it—is setting up something called junior ISAs. Junior ISAs are of no assistance in providing an incentive to save to families who do not pay tax. The attraction of ISAs for most people, including those on low pay who appear in the tax bracket, is the tax relief available. For others, there is little attraction other than putting the money into a Post Office account, or any other form of saving. The ISA works for those who pay tax. Some people under 25 undoubtedly pay tax, but many people pay no tax at all.

Mark Hoban: I appreciate that the hon. Lady is trying to keep things going while the right hon. Member for Delyn is not in his place, but does she not recognise that the provision is partly about attractive vehicles for people to save whether they pay tax or not? ISAs are a well-recognised brand for saving, which is why so many people on lower incomes use them.

Sheila Gilmore: It will be interesting to see how many people who do not qualify for tax relief will use ISAs for saving. I suspect they will be few in number. In my experience, ISAs are attractive because tax relief is available, and I think that is the case with the vast majority of people.

Kerry McCarthy: Does that not go back to my earlier point to the Minister that we need more information? If he is to rely on the fact that one in five people on low incomes take out ISAs, we need to know what sort of people they are. Are they former taxpayers who worked, but who are now on lower incomes? Are they older people? Do they have families? If we look at that, we might have an idea of what sort of people will take up junior ISAs. I suspect that it will be people who have used up their £10,600 or so adult ISA and who will see a junior ISA as another way of saving money.

Sheila Gilmore: That is an interesting point. People in those categories will find the ISA the most attractive way of saving. The purpose of the child trust funds was not just to provide an attractive form of saving to people who already could save, but to enable a step change in relation to asset transfer. A number of people gave evidence to us on that. The scheme is part of the long-term thinking for reducing inequality and improving the future of children, particularly those from the least well-off backgrounds. It needs to be given time to work. The stop-start, turn-the-tap-on, turn-the-tap-off approach to dealing with problems has been particularly harmful to this country’s social policy—all Governments can be criticised for that—and, as a result, we rarely give social programmes time to work to their conclusion. On child trust funds, we would have to wait some considerable time, but there would be merit in enabling us to return to the issue and put more money into them in future.
I am confident that the economy will recover, but there is an issue about exactly when that will happen, given the drastic deficit-reducing measures, which will, in my opinion, increase, not reduce the deficit. Leaving that aside, we all expect that a time will come when the economy will improve. We would then be able to pay money back into provision for a generation of children.
It is interesting to hear people making other proposals for what that money might or might not be used, but that is not what we are being asked to address today. We are not even being asked to address whether the money should go into the pupil premium, as suggested by the Liberal party manifesto. Indeed, I have heard many people suggest that the pupil premium will be financed by reductions in other parts of the education budget rather than the budget that we are considering. We are looking at whether we should retain child trust funds at all, or at least some form of mechanism that would allow them to be reopened, rather than having to reinvent a completely new mechanism at some future point.

Claire Perry: May I intervene?

George Howarth: You cannot intervene when an hon. Member has sat down, but you can make a speech.

Claire Perry: Thank you, Mr Howarth. I did not know whether the hon. Lady had finished her speech. Perhaps it is because her constituency is not in England, but I felt that she was—as many of us are—confused by the plethora of initiatives to help the poorest children and families that the previous Government introduced. They were initiatives that, given an unlimited supply of money, which the previous Government believed that they had—[Interruption.] It is interesting that Labour Members tend to groan whenever the notion of the deficit is introduced, indicating that, while in opposition, they continue to think that the deficit is something that came out of the swamp, rather than something that they created, but let us put that to one side as it is not relevant to the Bill.
In an ideal world, the political ambition of throwing lots of money at a wall called “child poverty” and hoping that some of it sticks is a laudable one, which is a nice thing to have to justify in one’s constituency—unlike the current situation that we have inherited. However, when times are tough, all Members should be looking for the highest value-added things that we can possibly do with every scarce tax pact. On both sides of the House, we are committed to early interventions and to helping the most disadvantaged families in society. Even in leafy, rural Devizes, we have our fair share of poverty, unemployment and families who desperately need Sure Start centres and educational support for the most disadvantaged children.
It is simply a question of what works best. Yesterday, we heard quite interesting evidence, from, for example, the gentleman representing the credit unions, stating that what we need is a step change in lending and financial support for the poorest families. That has not been delivered, despite the best intentions, but we have had some creative thinking about using post offices as a potential channel, which could be extremely helpful in rural constituencies.
Given where we are—none of us came into politics to be in this situation—all Members should be thinking creatively about which pound delivers the most value for our most disadvantaged children and families, rather than putting up a blanket smokescreen of opposition to reducing everything. We had conversations with some of our witnesses whereby we tried to ask them what, if we cannot have everything, the most valuable interventions are. Is it giving our poorest families a nest egg of £50? Even when amortised at today’s relatively low interest rates, that is, frankly, not a huge amount. We should ensure that our poorest families have stable family structures, access to excellent health care early in their lives and a pupil premium that means that they are attracted to schools and that schools will actually want to invest in supporting those families.
We should also ensure that our poorest families have an annual financial health check, because we have heard compelling evidence that it is not simply a question of families not taking up their allocation for their child trust funds because they do not know about it, or it is difficult. In many cases, they are chaotic families for whom the whole concept of saving and investment is completely alien.
One does not solve those problems by throwing money against the wall and hoping that some of it sticks. One solves it by tackling the issues, getting involved, ensuring that those families have far higher levels of support than they have received before and that they are helped into sustainable employment, for example.
One of the other compelling things that we heard from our trio of representatives was on single parenthood and women struggling to bring up families—one of the biggest issues around child poverty. Those are not women who will be accessing such financial products, no matter how much money we throw at them. They can be helped so much more effectively in so many other ways.
I will be happy to vote against the amendments. They are not a particularly effective use of the taxpayer’s pounds. Our coalition agreement has set out far more important ways of effectively tackling child poverty earlier in life. I urge all Members who care about child poverty and about our poorest families to vote against the amendments.

Yvonne Fovargue: I support the amendments, but I am slightly confused. The child trust fund money, because it is a voucher that is put into the account, is somehow, as Graeme McAusland said, seen as real money, whereas tax relief on ISAs is also money provided by the Government. I would like to see some examination of how much tax relief on the ISAs would be given to families as well.
Child trust funds are also an encouragement for people to save. I have a lot of experience with low-income families, and financial products are difficult for them to access. The understanding is not there. Banks are seen as an enemy in quite a lot of places; they are somewhere that you put a suit on to go to. The child trust fund has encouraged people to take up a financial product. As I said, 74% of people take it up. I appreciate that that means 26% do not take it up, but 74% means it is a much more successful financial product than any other on the market, including ISAs.
Anne Longfield gave evidence that the poorest people are contributing a higher percentage of their income as a top-up to the child trust fund than the richer families, and that percentage means a lot. We are ingraining a habit. We all accept that people at different times of their lives can save different amounts of money. That percentage means something. Being able to put £2 a week away means a lot more to some families than putting £200 a week away. Delaying this measure in order to look at what we can do for the low-income families would have great value.
At the end of its term, the child trust fund provides an asset. The most compelling argument I heard today was in the evidence from the United States that assets give choices. Having an asset can change behaviour. It gives people choices that they would not otherwise have, and we will be depriving children of choices. Perhaps I should declare an interest as my first grandchild is due in May, and she or he will be one of those lost children who will not be there at the right time for the ISAs and who will lose the child trust fund. Also, the fund means engaging with financial institutions and seeing who can provide savings. We heard the credit unions say that they no longer trust the Government’s processes, because things are removed at short notice, as has happened with the child trust fund. I urge delay. For the families that I see, I do not think that a financial health check would help, frankly. They know that they do not have enough; they know that they are in debt.

Fiona Bruce: Will the hon. Lady give way?

Yvonne Fovargue: Not at the moment. I have nearly finished.
Families do not want to be reminded that they are in debt. It is known in the CAB as the “behind the clock” syndrome. I believe that the child trust fund encourages people to examine their financial circumstances. I strongly urge delay until we can consider an alternative product.

David Hanson: I have two options—either to press the amendment to a Division or to withdraw it. Having listened to the debate, I wish to press certain amendments, because I am compelled to consider the written evidence in memorandum SA 02 from Save Child Savings. The respected organisations listed in paragraph 1.2 of that document have given evidence to us today, and they are considering the issue in the round. Save Child Savings alliance states:
“scrapping the CTF infrastructure, as proposed in the Bill, will not only endanger the UK’s savings culture—at this highly challenging point in the economic cycle—but will also result in a lost generation of children”
that the Minister has not planned for, before the summer of next year.
We need to examine such things in detail, and I wish to reaffirm, before we press the matter to a vote, that none of the amendments are ideal. Amendments 26, 1 and 10 are ones that, in the real world, we would not wish to table. We wish to retain the integrity of the child trust fund scheme, even at the scaled-down level that the Minister has suggested, following consideration of the amendments in July this year.
In the interests of pragmatism, however, we are trying to salvage something from a difficult situation in which we face, under clause 1, the complete abolition of the fund and the ending of the infrastructure accordingly. With that, I am minded to ask for votes on amendments 26, 1, and 10.

Question put, That the amendment be made.

The Committee proceeded to a Division.

John Hemming: On a point of order, Mr Howarth. As we will have several Divisions and we are all in the room, is it possible to shorten the waiting time?

George Howarth: It is possible if I get a signal from both sides.

Lyn Brown: No, I am not content, Mr Howarth.

John Hemming: I was not talking necessarily about this Division, but about subsequent ones, because the same hon. Members will be voting in each one.

George Howarth: We will come to that later.

The Committee having divided: Ayes 6, Noes 9.

Question accordingly negatived.

Amendment proposed: 1, in clause1,page1,line6,leave out ‘2011’ and insert ‘2014’.—(Mr Hanson.)

Question put, That the amendment be made.

The Committee proceeded to a Division.

John Hemming: May I repeat my point of order, Mr Howarth?

George Howarth: Yes.

The Committee having divided: Ayes 6, Noes 9.

Question accordingly negatived.

Amendment proposed: 10, in clause1,page1,line6,leave out ‘2011’ and insert ‘2016’.—(Mr Hanson.)

Question put, That the amendment be made.

The Committee divided: Ayes 6, Noes 9.

Question accordingly negatived.

Ordered, That further consideration be now adjourned. —(Mr Goodwill.)

Adjourned till Tuesday 9 November at half-past Ten o’clock.